Inflation breaks out of SARB Corridor

It was to be expected, with a deteriorating exchange rate and a slowly rising oil price it was only a matter of time before the local inflation will catch up with the sad reality. The annual consumer price inflation (CPI) was 7% in February 2016, up from 6.2% in January 2016 – when it breached the SA Reserve Bank’s target range, Statistics SA announced earlier today. This is the highest rate since May 2009 when the rate was 8%. The CPI increased by 1.4% month-on-month in February 2016.

Last week, SARB governor Lesetja Kganyago announced a 25 basis-point hike in interest rates to 7% to help keep inflation in check. This was after SARB’s monetary policy committee (MPC) decided to hike the repo rate by 50 basis points to 6.75% at its last meeting in January this year. This means the prime interest rate is now 10.5%. The latest data shows that food and non-alcoholic beverages increased from 1.1 percentage points in January to 1.3 percentage points in February. The index increased by 8.6% year-on-year. Alcoholic beverages and tobacco decreased from 0.5 of a percentage point in January to 0.4 of a percentage point in February. The index increased by 7.6% year-on-year.

Transport increased from 0.9 of a percentage point in January to 1.3 percentage points in February. The index increased by 8.7% year-on-year. Miscellaneous goods and services increased from 1.0 percentage point in January to 1.1 percentage points in February. The index increased by 6.8% year-on-year.

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