Business Maverick

ECONOMIC OUTLOOK

Marginally higher CPI may persuade Monetary Policy Committee to hold rates steady

Marginally higher CPI may persuade Monetary Policy Committee to hold rates steady
(Photo: Simon Dawson / Bloomberg via Getty Images)

With inflation appearing to be under control, the MPC is likely to keep the repo rate on hold at 8.25% and the prime lending rate at 11.75%.

South Africa’s annual consumer price inflation (CPI) edged up marginally to 4.8% year on year in August, from 4.7% in July, Stats SA reported on Wednesday, which means the South African Reserve Bank is unlikely to lower the repo rate — for now.

The statistics agency’s data shows that the CPI increased by 0.3% month on month in August.

The biggest contributors to the 4.8% annual inflation rate were food and non-alcoholic beverages (which increased by 8% year on year and contributed 1.4 percentage points); housing and utilities (up by 5.5% YoY, contributing 1.3 percentage points); and miscellaneous goods and services (up 6.2% year on year, contributing 0.9 of a percentage point). 

In August, the annual inflation rate for goods was 5.6%, up from 5.5% in July; and for services it was 4% (unchanged from July).

The release of the latest inflation data comes a day before the central bank’s Monetary Policy Committee wraps up its three-day meeting.

With inflation appearing to be under control, the MPC is likely to keep the repo rate on hold at 8.25% and the prime lending rate at 11.75%.

Economists polled in a Bloomberg rate-decision survey before Stats SA’s release predicted that the MPC will hold borrowing costs — with several expecting it to be cautious of declaring a victory over inflation. 

This would be in line with last month’s decision, when the MPC held rates steady — its first such decision after 10 consecutive hikes to curb inflation.

Investec economist Annabel Bishop expects SA’s inflation rate to be around 5% y/y, and CPI to average at 5.8% this year. 

“The rand and fuel prices pose risks, and so do El Niño weather pattern effects for food prices next year, with SA at risk of drought then. 

“The petrol price rose by 37c/litre in August, contributing some slight upwards pressure to inflation. However, September recorded a larger petrol price hike, of R1.71/litre, which will contribute substantially to its inflation outcome,” Bishop said.

The latest data from the Central Energy Fund suggests next month is likely to see another big increase in the fuel price, with diesel prices expected to increase by as much as R2 a litre, depending on the grade, while 95 and 93 unleaded petrol could increase by R1.23 a litre and R1.15c, respectively, further adding to inflationary pressures. DM

Gallery

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

Become a Maverick Insider

This could have been a paywall

On another site this would have been a paywall. Maverick Insider keeps our content free for all.

Become an Insider
Daily Maverick Elections Toolbox

Download the Daily Maverick Elections Toolbox.

+ Your election day questions answered
+ What's different this election
+ Test yourself! Take the quiz