February saw a rise in consumer inflation in South Africa for the second consecutive month, bringing it ever closer to the upper target set by the Central Bank. This may indicate longer wait times for rate reductions, according to national economists.
According to Reuters, headline consumer inflation rose to 5.6% year on year from 5.3% in January per South African statistics data.
Food, housing, transportation, and other miscellaneous products and services like health insurance are major factors that influence the annual inflation rate.
Next week, the South African Reserve Bank—whose goal inflation rate is between 3% and 6%—will make an announcement about monetary policy.
The majority of economists were taken aback by the country’s inflation spike and emphasised that it might cause the Central Bank to postpone further interest rate reductions.
Senior market analyst Shaun Murison of a Sandton-based financial firm discussed his thoughts on the nation’s rising inflation.
According to Shaun Murison, “the news doesn’t bode well for expectations of rate cuts in our local economy for the first half of 2024.”
According to a survey conducted in February, the central bank is not likely to announce any interest rate reductions until at least the third quarter of this year.
The higher-than-expected inflation figure, according to Capital Economics’ African economist David Omojomolo, will pressure the Central Bank to hold off until after the May 29 national elections.
“Before they feel comfortable cutting interest rates, officials will want to see some clarity in the composition of the next government and the direction of fiscal policy,” Omojomolo stated.
On May 29, 2024, general elections will take place in South Africa to choose a new National Assembly and provincial legislatures for each province.