Inflation Rate continues to rise, prompting for an (inevitable?) Interest Rate Hike by SARB

It was to be expected that – although the Rand Exchange Rates are slowly recovering after the BREXIT-caused panic sales of the Rand – the aftermath will be felt through a rising inflation as imported consumer goods, ordered and paid for a month ago, now hit the shelves and the retail tills. Therefore the current prices, which increased on average by 0.6% between May 2016 and June 2016, according to data released by Statistics South Africa yesterday will not be the end of this tendency.

The annual consumer price inflation for June 2016 is now 6.3%. This is up from 6.1% reported in May 2016. In that period prices rose across the board. Food and non-alcoholic beverages lifted from 1.6% in the previous month to 1.7%. The index increased by 10.8% from the previous year. Housing and utilities were up to 0.2%. The increase in transport to 0.2% was mostly due to the 52 cents per litre increase in the petrol price and a 5.1% hike in air fares, the report stated. In June the consumer price index (CPI) for goods increased by 6.7% from the previous year, up from 6.6% reported in May. This increase is higher than the current 6.1% inflation rate. The CPI for services increased by 5.8% from the previous year, up from 5.7% in May.

What does this mean for the consumers? Not only that the cost of living is still increasing, but be on the lookout and watch the Monetary Policy Committee of the Reserve Bank (SARB) as they might feel that their hands are forced to vote for a hike of interest rates, which in turn will make credit more expensive and will add an additional burden on the consumer. Therefore: Be wise, and avoid additional credit, rather try to reduce existing credit in order to brave yourself for a more than likely interest rate hike.

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