Fed weighs first US rate hike since 2023 as Brent crude nears $110

The United States Federal Reserve began a two day rate setting meeting on Tuesday, with markets expecting its first interest rate increase since 2023 and Brent crude futures pushing back towards $110 a barrel.

As eNCA reported on 16 September, the meeting opened against a backdrop of persistently high American consumer prices, a record US diesel price of just under $6,27 a gallon, and a 10 year Treasury yield of 5,03 percent, a level last reached in 2007. Those are American numbers, but they set the price of the petrol that goes into a South African minibus taxi, the yield on the debt that funds the country’s borrowing, and the direction of the rand.

What the Fed is deciding, and why it matters here

American inflation has stayed well above the Fed’s target despite three years of restrictive policy, and market expectations of a 25 basis point increase hardened after official data published last week. If the Federal Open Market Committee votes to raise on Wednesday, it will be the first increase since 2023, when the Fed was still fighting post pandemic inflation.

The South African Reserve Bank does not follow the Fed mechanically. It sets the repo rate at its own Monetary Policy Committee meetings, and its mandate is to keep inflation inside a 3 percent to 6 percent target band. But the transmission is real. A higher US policy rate typically strengthens the dollar, and a weaker rand makes every barrel of imported crude more expensive in rands before a single litre reaches a forecourt.

That is the mechanism South African motorists will feel first. Fuel prices are adjusted on the first Wednesday of each month by the Department of Mineral Resources and Energy, using a formula that tracks international product prices and the rand dollar exchange rate over the preceding period. Brent has spiked above $100 a barrel this month, driven by the crisis in the Middle East and by Yemen’s Houthi rebels taking control of a crucial shipping outlet, according to the reporting by eNCA.

The oil price is doing the work

Crude at these levels is the more immediate pressure. South Africa imports the bulk of its refined fuel, so the landed cost rises with the international price and the exchange rate together. Diesel matters most of all, because it moves the trucks that move the food. The diesel price at the pump feeds into the cost of a loaf of bread and a bag of maize meal long before it shows up in the headline inflation number.

Higher fuel also feeds directly into the Consumer Price Index basket through transport, which carries a heavy weight for lower income households who spend a larger share of their income getting to work.

The US diesel record is a separate American story, but it is the same commodity complex. When diesel is scarce and expensive in the world’s largest economy, cargoes are bid away from other destinations, and South African importers pay the clearing price.

What the Reserve Bank has already done

The SARB has held its repo rate at 7 percent since mid 2025, after cutting from a peak of 8,25 percent, and its statements have repeatedly flagged the exchange rate and imported inflation as the risks it watches most closely. Governor Lesetja Kganyago has argued in public that the bank’s inflation target should be lowered to 3 percent, a position that has put it at odds with parts of the government and with labour federations who want cheaper credit.

That argument now plays out against a global backdrop in which the European Central Bank raised rates last week and the Bank of England is expected to hold on Thursday as the UK economy struggles for growth. South Africa is not alone in tightening, and it is not the only emerging market watching the dollar.

What a South African reader should watch

The first thing to watch is Wednesday’s Fed decision and the language that accompanies it. A hike that is presented as a one off, with a clear signal that the committee is done, is a different outcome for emerging market currencies than a hike presented as the start of a new cycle. The rand will price that difference within minutes.

The second is the October fuel price adjustment, which will reflect September’s oil and currency moves. The third is the SARB’s next MPC meeting, where the bank will weigh a weaker rand against an economy that is not growing fast enough to absorb higher borrowing costs.

Wall Street spent Tuesday in the red, with the broad based S and P 500 down 0,5 percent, following losses in Europe and Asia. Jose Torres of Interactive Brokers, in a note quoted by eNCA, attributed the weakness to the heavier cost of capital, rising fuel charges and concerns about the rapid adoption of artificial intelligence. Susannah Streeter, chief investment strategist at Wealth Club, told the outlet there was no let up in the volatility rippling through financial markets.

Those are market voices describing market conditions. The South African consequence is more ordinary. It is the price on the board at the filling station, the fare a commuter pays on Monday morning, and the interest a household pays on a vehicle finance agreement. None of those are set in Washington. All of them are shaped by what happens there this week.

Source: eNCA, Markets on edge as US Fed meets to tackle high inflation, 16 September 2026.