South African inflation rises

by Richard Kilner

Story link: South African inflation rises

South African interest rates could be set to rise, as inflation reached 8.6% last month and is expected to break the 9% barrier.

The Reserve Bank’s monetary policy committee will meet again in April to discuss possible rate changes, after announcing its latest decision this afternoon.

Since mid-2006 the South African interest rate has risen by 400 basis points in an effort to beat off inflationary pressures caused by growing credit demand.

December’s home loan figures indicated the lowest growth rate for nine months, and credit fell (from November) to 21.5% from 22.6%.

However, mortgages rose in November to R16bn.

The biggest drivers of inflation are food and petrol prices, but the food price is predicted to stop rising as rapidly as it has been during the year.

In addition, the country’s poor energy supply could put further pressure on inflation, particularly if the rate of power cuts increases.