Inflation figures released today showed that the CPIX rate rose from 10.1% in March to 10.4% in April. The rate seems to be edging further and further away from the central banks target of having inflation being between 3 – 6%. This is the 13th month in a row that inflation has been outside the central banks target. Prior to the announcement, CPIX was expected at 9.9%, an I-Net Bridge survey found, with forecasts ranging from 9.8% to 10.3%. With inflation now at 10.4%, the question now is not if the central bank is going to increase interest rates in June but rather, by how much are they going to increase them?

The prime interest rate in South Africa is currently 15% and chances are we could have a 50 basis point hike in June and maybe another one in August. Some predict that we could be seeing a 100 basis point hike in June. Today’s inflation figures come off the back of the GDP figures released yesterday. Growth in the first quarter of the year was only 2.1% compared to 5.3% in the previous quarter.

The rate of inflation may continue to rise depending on how the electricity price tariffs are resolved. Inflation could reach 12% if Eskom get the go ahead to increase tariffs. We are in for tough times in South Africa. The combination of high inflation and a slowing growth rate of the economy is not an ideal situation to be in.

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