SARB should consider pausing rate hikes - economist
North-West University Business School’s Professor Raymond Parsons says although the consumer inflation decrease is welcome, it was not unexpected.
Parsons says CPI has been cooling since May.
Parsons was commenting on the announcement of the headline consumer inflation eased to 6,3% in May from 6,8% in April.
Stats SA released the latest stats on Wednesday.
Parsons says core inflation remains stubborn.
"The inflation outlook must now also be seen in conjunction with the latest leading business cycle indicator of the South African Reserve Bank, which declined further in April.
"On an annual basis, this leading business cycle indicator fell by 9.1% year-on-year. Other recent high-frequency economic data also strongly reinforce the expectations of much weaker business conditions prevailing in the second half of 2023, with downside risks."
Parsons adds that the Reserve Bank should take a leaf from the US Federal Reserve’s book and consider pausing further interest rate hikes at its July meeting.
"There are time lags between monetary policy decisions and their effects on the real economy that need to be weighed. It is now necessary for the SARB to also assess what the cumulative impact of its rate hikes since November 2021 has had on the economy."
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