South Africa is heading for another big interest rate hike
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Loading... - Ndumiso Msomi
- 13 Jun 2022
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While the extension of the fuel levy relief curtails near-term domestic inflationary pressure somewhat, consumer price (CPI) inflation is still set to come out higher this year than previously estimated, say economists at the Bureau for Economic Research (BER).
In a note on Monday (6 June), the group noted that South African retail prices are set to increase even further, especially on the food price front. At the same time, a higher-than-expected oil price means that the fuel price is set to remain elevated, it said.
“Therefore, we now see consumer inflation averaging 6.1% in 2022, with headline CPI likely peaking above 6.5% in June.
“This does add to the risk that the South African Reserve Bank (SARB) may feel compelled to hike its repo rate by another 50 basis points (bps) next month, but for now, we stick with the forecast for a 25bps hike, albeit that this is a low conviction call,” the group said.
Fuel levy
On Tuesday (31 May), the National Treasury and the Department of Mineral Resources and Energy announced that the general fuel levy reduction of R1.50/litre would be continued for another month. The reduction would then be halved to R0.75/litre in July, with the relief ending in August.
This further extension of the fuel levy reduction would cost the fiscus R4.5 billion, the BER said.
“Unlike the previous reduction in April and May which was made possible by the sale of strategic oil reserves, it is not yet clear how the extension would be funded. Read More…
