Slowing inflation won’t stop rate hike - economist
Chief economist at Econometrix Azar Jammine says the increase in the prices of basic food items negates any benefits the lower consumer inflation might hold for South Africans.
Statistics SA released the latest CPI figures on Wednesday, which saw consumer inflation easing to an 11-month low.
Headline consumer inflation slowed to 6,8% in April from 7,1% in March.
According to Stats SA, vegetables were 23.1 percent more expensive in April 2023 compared with April 2022, the highest annual rate since November 2007.
“If you exclude food and fuel, the core CPI rate actually rose to its highest level in a number of years at 5,3% in April compared to the 5,2% in March. It hardly benefits South Africans. It’s just a case of South Africans not having to endure an increase in prices as big as expected,” said Jammine.
He said despite the overall drop in inflation, he expects the South African Reserve Bank to raise interest rates again on Thursday.
“In light of the fact that the rand has depreciated so sharply in recent weeks, there is largely to be further upward pressure on the inflation from that source. We are also looking at the possibility of stage 8 load shedding in the middle of winter according to Eskom, that could exert further upward pressure on food prices. So, the Reserve Bank will look at this and probably raise the repo rate by 0.5% tomorrow.”
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