Another rate hike on the cards, warns economist
Chief economist at Econometrix Azar Jammine has warned indebted South Africans to expect another increase in the interest rate.
This after Stats SA released the latest data on Wednesday, which shows that the headline consumer price index rose at an annual rate of 7% in February, up from 6.9% in January.
This is the first time in four months South African consumers experienced a rise in inflation.
Jammine says he expects the Reserve Bank’s Monetary Policy Committee to hike the repo rate when it meets next week.
“There’s not much that people can do in the face of these price increases. In fact, what these prices increases will probably do is to encourage the Reserve Bank to increase interest rates again when the Monetary Policy Committee meets next week.”
Jammine says businesses will not be able to absorb the continuous price increases and will pass it on to consumers.
“All the industries that are dependent upon imported inputs, businesses are clearly not going to be able to contain the increased cost of imports indefinitely, and are starting to pass through that increased cost to consumers.”
He says the rand is mainly to blame latest inflation figure.
“The main reason for the increase in inflation is the depreciation of the rand which is now affecting import prices. The core inflation rate, which excludes food and fuel, went up by 3% to 5.2% and that is a warning sign that more general inflation pressures started building up during the course of February, which is quite unfortunate but expected, given the steep fall of the rand.
“Fortunately, the economy is still holding relatively stable despite all these headwinds that are taking place, and that suggests that there are underlying forces of resilience within the economy that are preventing it from collapsing completely.”
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