The shocking May inflation rate increase to 6,5% announced on Wednesday morning, spells trouble for consumers who are already battle to make ends meet. It is now almost certain that the repo rate will increase by 50 basis points in July, that will mean another increase in interest rates for already heavily indebted consumers.
Food and fuel prices pushed inflation to the highest rate in five years in May, with annual consumer price inflation increasing by 0,7% from 5,9% in April and March, according toTransport, food and non-alcoholic beverages accounted for just over half of the annual rate. Fuel is still a major contributor to the inflation rate, which would fall to 5,1% to 6,5% if the impact of the fuel price is removed.
Core inflation, which excludes volatile items such as food, non-alcoholic beverages, fuel and energy, increased by 0.2 ppt to reach 4.1% compared to May 2021, which is consistent with the ongoing recovery momentum in consumer demand.Goods inflation accelerated from 8.5% to 9.5% compared to May 2021, while annual services inflation increased to 3.6%, compared to 3.5% in April.
Economic research group, Oxford Economics Africa, says the increase in inflation was way above the consensus forecast for a 6.1% year-on-year increase. “The US Fed’s ‘no more Mr Nice Guy’ approach to surging inflation places the Sarb under pressure to be more attentive to the rising risk of currency depreciation and attempts to curb foreign investment outflows.”
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