Inflation rates in South Africa appear to be balanced and under control

A low level of inflation in the price of food is keeping overall inflation in South Africa at manageable levels by South African Reserve Bank (SARB) standards, according to senior economists at PwC Strategy& Africa Lullu Krugel and Christie Viljoen. Overall inflation rates in the country have registered a dip this month.

Rising inflation rates have been a major cause for concern for South African policy makers in recent years, particularly those at SARB and the treasury department. Inflation has prevented the government from implementing much-needed hikes in the interest rate, as the strain on public coffers increases.

Keeping the inflation rate under control is crucial to the South African administration’s economic plans, which include sizeable foreign investments in the future. Lullu Krugel and Christie Viljoen have offered their take on the country’s inflation rate, based on analysis from Statistics South Africa.

According to the new data, the overall inflation level on consumer prices has decreased in year-on-year terms from March to April this year. This decline appears to be the product of internal balancing, with prices in some sectors increasing and other sectors registering considerable drops.

For instance, inflation in the alcoholic beverage & tobacco sector was relatively slow last month, although it’s positive effects were nullified partly by a considerable increase in transportation prices. Overall, however, food prices appear to be maintaining a degree of stability in the inflation rates.

Inflation in food prices has been at a steadily low 2.3% for four months now, which – according to Krugel and VIljoen – appears to be keeping the overall inflation level below the target upper-limit of 4.5%. The economists do not expect any policy changes in light of these stable trends.

“After making no change to interest rates at the January and March meetings, Strategy& Economics expects policymakers to again make no change at this week’s meeting. However, while a ‘hold’ on interest rates will be welcomed, the MPC statement will certainly not be all good news. The SARB definitely will highlight the weak state of the local economy following disappointing mining, manufacturing and employment data released in the month so far,” said Krugel and Viljoen in an article.