(3 minutes read)
· South Africa’s inflation is at its highest level in 15
months, creating massive disruptions to the economy
· Inflation was mostly fuelled by a 14% increase in gasoline
prices in February.
South Africa’s inflation is at its highest level in 15 months,
creating massive disruptions to the economy. Consumer prices rose by
4.6% year-on-year, up from 4.5% in January, according to the South
African Bureau of Statistics. The South African monetary authorities
are caught up in a bind. Against the backdrop of an unprecedented
inflationary spiral, the monetary authorities normally increase the
rate of interest to stem the money in circulation. However, the
current coronavirus scare coupled with the recessionary conditions in
the economy would not allow the authorities to take such a drastic
step. To pep up the economy, they have to follow a soft interest rate
policy, which theoretically can add to inflation. However, the experts
are of the view that the increase in inflation should not deter the
central bank from cutting the benchmark interest rates, when it would
meet shortly.
Inflation was mostly fuelled by a 14% increase in gasoline prices in
February. There is an expectation that inflation would moderate in the
coming days thanks to a sharp drop in oil prices. Driven by the
unsavory conditions, the central bank may review downwards its price
growth forecast for the year. Presently, it is kept at 4.7%. The
monetary policy committee, which is likely to meet shortly, may reduce
its forecasts of growth of the economy further. It has sunk into a
second recession in two years, even before the coronavirus was set
in. According to official sources, annual core inflation, which does
not fact in the prices of food, non-alcoholic beverages, fuel and
electricity, accelerated to 3.8% from 3.7%.
