Interest rates likely to remain unchanged despite CPI increase: Economist

September 21, 2023 40

Veteran Economist, Dawie Roodt, says the latest Consumer Price Inflation (CPI) figures suggest that the South African Reserve Bank (SARB) will likely keep interest rates unchanged when its Monitoring Policy Committee meets today.

Statistics SA has announced that CPI increased from 4.7% in July to 4.8% in August.

This is after four consecutive months of decline.

The data agency says the monthly change in CPI was 0.3% in August, down from 0.9% in July.

“Inflation for food and non-alcoholic beverages (NAB) continued to cool, taking some of the heat off the headline rate. This was not enough, however, to counteract a rise in fuel prices and increases in municipal tariffs.”

The bread and cereals category registered an annual rate of 9,9%, lower than July’s reading of 13,1%, this while the annual rate for milk, eggs and cheese category eased from 14,4% in July to 11,9%.

The annual rate for meat inflation declined to 3,6% from 5,1% in July.

Annual inflation for alcoholic beverages slowed to 6,9% from 7,8% in July.

Roodt says the latest figures are good news.

“My suspicion is that inflation is likely to remain more or less at these kinds of levels which is basically good news, which also means that the reserve bank is likely to keep interest rates unchanged for now.”

He adds that the country might have already reached the turning point cycle for interest rates for now.

Roodt says the increase in the rate of inflation is nothing to worry about.

Stats SA further announced that electricity tariffs increased by 15.3% in 2023, a much higher rise than the 7.9% recorded last year.

“Households paid 9,6% more for water in 2023 after bearing the brunt of an 8,1% rise the year before. Property rates were up by 8,4% following a 4,3% increase in 2022.”

The Western Cape province experienced the highest increase in both electricity and property tariffs.

Written by: Lindiwe Mpanza

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