Business Maverick: South Africa’s cost-of-living crisis worsens as consumer inflation breaches the Reserve Bank’s 6% target

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Consumer inflation for May accelerated to 6.5%, outside of the Reserve Bank’s range and much higher than expected. Typically the Bank wants inflation to be between 3% and 6%. The upward trend in inflation is set to push the Bank to continue interest ...

Consumer inflation in South Africa has continued its relentless surge to a new six-year high of 6.5% in May 2022 from the same month a year ago, driven by skyrocketing food and fuel costs.

The Reserve Bank, which has the role of stabilising prices, typically wants the inflation rate to be between 3% and 6%. But at 6.5% in May, it has breached the upper 6% limit of the target band set by the bank. It is also the 13th consecutive month in which annual inflation has been higher than the midpoint of the bank’s target range.

Price pressures have also been building up from supply constraints and strong consumer demand as South Africa’s economy continues to recover from the Covid-19 pandemic.Industry players expect the upward trend in inflation to push the Reserve Bank to continue increases to the repurchase or repo rate, which informs the interest rates at which commercial banks lend to households and businesses. The Bank’s next repo rate decision is expected on 21 July.

The latest unaudited data released by the Central Energy Fund, a state-owned entity that tracks fuel prices, indicate that prices for different grades of petrol are set to rise by between R1.85 per litre and R2 per litre in early July. These sharp increases can be attributed to a strong dollar, a weakening rand, bullish global oil prices and the war in Ukraine.

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..and dinosaurs at SARB will respond by increasing the repo rate basis. They have been doing exact same thing for the past 30yrs

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