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‘Consumer inflation confirms rate hike’

Johannesburg - The consumer price index (CPI) figure for June is confirmation of the SA Reserve Bank's motivation for the recent interest rate hike, Seifsa said on Wednesday.

“The June figure of 6.6 percent is high, and may fuel expectations of more to come,” Steel and Engineering Industries Federation of SA (Seifsa) chief economist Henk Langenhoven said in a statement.

Central bank govenor Gill Marcus. Photo: Mxolisi Madela. Credit: Independent Newspapers

Seifsa is the national employer federation in the metal and engineering industry.

“This is the key problem facing the governor of the Reserve Bank - managing inflationary expectations with interest rate increases without stunting domestic growth, all the while keeping an eye on what other central banks are doing.”

CPI for all urban areas remained unchanged in June.

The CPI was 6.6 percent, the same as in May, Statistics SA said.

On average, prices increased by 0.3 percent between May and June this year.

Langenhoven said the next producer price inflation numbers would indicate whether the cost pressures were sustained.

The two biggest risks contributing to upward pressure on costs were the exchange rate weakening and the continued oil price increase.

“We all hope that, on balance, these factors will contribute to a positive outcome of the already precarious choices the country needs to make, and not worsen it,” he said. - Sapa

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