Consumers are at their wits end as an anticipated interest rate hike is expected to be announced by Reserve Bank governor Lesetja Kganyago on Thursday next week.
It has been a constant financial battle as since November 2021, interest rates have risen by 375 basis points.
The prime lending rate is currently at 10.75%, and the increase will take it up to 11%, according to Nedbank, which predicts that a 25-basis point hike is guaranteed.
“In our opinion, today’s inflation numbers seal the deal on another 25 basis-point rate hike next week,” Nedbank says on its website.
“The MPC [monetary policy committee] will be concerned by continued acceleration in food prices, which appear to reflect the adverse impact of loadshedding on production costs.
“The MPC will also be alarmed by the acceleration in core and services inflation, which suggests broadening price pressures.”
Headline inflation grew from 6.9% in January to 7% in March, while core inflation saw a bigger jump, from 4.9% to 5.2%.
It is reported that inflation was largely driven by food and non-alcoholic beverages, which saw inflation climb to 13.6% from 13.4% in January, which is the highest level since 2009.
“Food prices were to blame, jumping to 14% year on year,” according to Nedbank.
“Most of [the] drag will stem from fuel prices, which will benefit from lower Brent crude prices, which will be dragged down by slower global demand, particularly consumer spending in the major economies.
“Food inflation remains sticky but is probably near its peak and should also begin trending down during the second quarter, reflecting the lagged effect of the moderation in global food prices and favourable weather conditions.”
Nedbank said the rand remains under pressure from volatile global risk sentiment.
“Domestic factors such as power shortages and political noises ahead of the elections next year will also weigh negatively on the local currency.
“While the upside risks remain considerable, we still expect inflation [to] dip below 5% by the end of the year, as the economy slows down to a crawl.
“At this stage, we see the first cut in the cycle at the November meeting.”
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