Stubborn CPI could see another rate hike: economist
Efficient Group chief economist Dawie Roodt has warned that the stubbornly high consumer inflation could see the South African Reserve Bank raise the repo rate yet again.
Stats SA released the latest CPI numbers on Wednesday.
Headline consumer inflation rose to 7,1% in March from 7% in February and 6,9% in January.
Food, non-alcoholic beverages and transport were the main drivers behind the annual and monthly increases.
“This came as a bit of a shock,” Roodt says.
“I expected the inflation rate to ease quite a lot which didn’t happen. So I’m quite concerned about this increase in the inflation rate and obviously this means that chances are high that the Reserve Bank may decide to increase interest rates again and this time by approximately 25 basis points.
“Technically, there are a number of reasons why we see an increase in the inflation rate, which has to do with things like an increase in food and energy prices. But fundamentally, the problem in SA is that we do not have a proper competitive economic environment.”
Roodt says high inflation is not only a South African issue, but is likely to come down quicker in other countries.
“The general trend internationally certainly is stubbornly high inflation rate but in countries like the US, their inflation seems to be coming down quicker than places like SA and that is something we need to be concerned about.
“We will continue to have upward pressure on inflation in South Africa and that has to do with macroeconomic policies by the government and not the Reserve Bank. The Reserve Bank is trying to mop-up after the mess caused by the government.”
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