Debt-laden consumers could face more pressure from the South African Reserve Bank (SARB) in September as the lending rate is likely to increase further, says London-based Capital Economics (CE).
According to Virág Fórizs, an emerging markets economist for the independent researcher, “the latest rise in inflation in South Africa to 7.8% year-on-year (y-o-y) in July will raise the pressure on Reserve Bank officials to continue tightening policy aggressively.
“Even as signs of a faltering economy emerge, policymakers will probably still press ahead with another 75 basis point hike in September,” Fórizs writes.
Relying on figures released by Stats SA earlier today, she says it shows that inflation rose from 7.4% y-o-y in June to a 13-year high of 7.8% y-o-y in July.
The uptick was a touch above CE’s forecast of 7.6%, but in line with a consensus estimate collected by Bloomberg.
Here’s what’s worrying though: in monthly terms inflation has been increasing at a rate of 1.5%.
“The breakdown of the data showed that fuel and food inflation were the main contributors to the rise in the headline rate,” Fórizs says.
“Petrol inflation increased sharply, from 45.3% y-o-y in June to 56.2% y-o-y in July, adding 0.5% pts to the rise in headline inflation. And food inflation reached a five-and-a-half-year high of 9.7% y-o-y last month, pushing the headline rate up by another 0.2% pts.
