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Interest rate hike looms in November after inflation soars

Female accountant or banker use calculator.

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Published Oct 19, 2023


Durban - An interest rate hike looks likely in November after a huge increase in inflation from 4.8% in August to 5.4% in September.

Economists said the increase in inflation could be attributed to higher food prices and two major fuel price hikes in September and this month.

Professor Bonke Dumisa, an independent economic analyst, said the rise in inflation was bad news for consumers.

“The fact that inflation has gone up so significantly means it’s almost certain that we will see an interest rate hike in November. I was hoping that inflation would be just above 5% and if the fuel price decrease does happen in November they would leave interest rates unchanged, but 5.4% is too high.

“The reserve bank has to keep to its target of having inflation between 4 and 6% and so 5.4% is too high.”

Dumisa added that the jump in inflation was likely due to fuel price hikes.

“We had major increases in the fuel price and the issue is that 90% of food is transported by road. Higher prices for fuel meant the price of food went up and that is what drove inflation up so significantly.”

Economist Dawie Roodt agreed that the interest rate would be hiked in November.

“I expect the South African Reserve Bank (SARB) to increase interest rates by 25 basis points at its next meeting in November. Heading into the new year we have to keep an eye on the rand to the dollar exchange rate and price of Brent crude oil as this could mean more interest rate hikes in 2024. For now an interest rate hike in November is reason to be concerned.”

Dick Forslund, from the Alternative Information and Development Centre, said the increase in food prices drove inflation up.

“Basic vegetable prices have increased by 15% year-on-year and even the price of potatoes has seen a major increase. The SARB normally follows the US Federal Reserve in interest rate decisions, but with inflation so high it will probably just go ahead and increase the interest rate in November.”

Abigail Moyo, spokesperson of the trade union Uasa (United Association of South Africa) said: “The recent sharp increase in consumer price inflation as announced by Stats SA is reason for concern in terms of possible further interest rate hikes and the effect on workers’ overall cost of living.

“The continuous increase in fuel and food prices, relatively low or no salary increases, as well as the highest interest rates in more than a decade have become a living nightmare for many.”

She said households’ disposable incomes continued to shrink.

“South Africans need government to come up with a concrete turnaround plan for economic recovery and the persistent high levels of unemployment. This should be the core mandate for growth and sustainability.”


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