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Inflation hits 5.2%

The highest in 30 months.
Rising CPI puts the South African Reserve Bank under pressure to raise interest rates. Image: Waldo Swiegers/Bloomberg

Inflation has hit a 30 month high, with the Consumer Price Index (CPI) accelerating to 5.2% in May from 4.4% in April, in figures released by Stats SA on Wednesday.

In reaching the 5.2% mark, not only has it hit the highest level since November 2018, it crosses the midpoint of the South African Reserve Bank’s (Sarb) inflation target of 3-6%.

Source: Stats SA

The sharp increase in inflation puts pressure on the Sarb, which has cut interest rates by three percentage points in the past year as a way to support the economy in the wake of the Covid-19 crisis.

With CPI now crossing the bank’s inflation target, its Monetary Policy Committee will have to think long and hard about whether it should divert from its current policy of maintaining interest rates or raising them to control inflation.

Source: Stats SA

Fuel price rise

The biggest driver to the increase in CPI is the price of fuel, which is 37% more expensive than it was a year ago.

“Despite a small monthly drop in the fuel price in May, the annual increase quickened to 37.4% from 21.4% in April,” Stats SA said.

The rise in fuel prices can be seen in petrol prices being 41.8% higher in May 2021 compared with May 2020, while diesel is 27% more expensive.

When fuel, food & non-alcoholic beverages, and energy are excluded, the rise in core CPI is a more muted 3.1%.

Not just fuel

Aside from higher fuel prices, food & non-alcoholic beverages inflation showed a notable acceleration to 6.7% in May from 6.3% in April.

“May’s reading is the highest since July 2017. Meat, fish, oils, sugar, sweets and desserts recorded rates higher than 6.7%.

“Annual meat inflation has stubbornly remained above 6% since October 2020, climbing to 8.5% in May. Prices for fish products increased at a brisk 7%, slightly lower than April’s 8.1%.”

There was also a notable increase in alcoholic beverages & tobacco products, which registered an annual rise of 5.8%. Wine prices have jumped 7.2% and tobacco prices by 6.6%.

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… and that’s the indicator. Inflation on the shelves is much higher.

Increases in food and fuel prices directly attributable to increased ANC government taxes and levies at the pump.

Regulated prices are ALWAYS attributed, in/directly, to a/the government.

Ah finally, the wheel is turning.

Inflation is always combated with interest.

To all the recent home buyers – good luck with the climbing interest rates – I sincerely hope you didn’t over extend your cashflow.

we could only wish for fixed rate bonds like you get in developed markets.
How do they manage to offer 20 year fixed rate (ignoring the 2% rate, just the fixed part) – how do they manage it and why has it been impossible in SA?

High fuel prices with a VERY strong rand??

You aint seen nothing yet.

Once it starts running away it is doubtful they will stop it in the short term with raising interest rates.

The property “boom” might be sorter than anticipated.

Only Cyril will be shocked.

We trust no number/statistic from cANCer gubberment , so why believe this number , the man in the street know this is bogus

Hiking rates would be like shooting one of the horses on the cart just as it starts finding a way through the muddy River.

Official inflation is much lower than real inflation, by about at least 3-5%.

The increase in basic food priced far exceeds this fictitious denial. The enormity and across-the-board nature shouts collusion.

And so very soon the artificially low interest rate period will come to an end. I personally know a couple people who bought property over the last year with low rates. I advised that they calculate affordability with a higher rate, but alas they did not.

These low rates over the last year was a once in a life time situation and I expect the rates to quickly within 2/3 years return to pre pandemic levels.

All I can say is good luck to those who bought properties in the last year that they realistically could not afford.

End of comments.

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