Consumers may get some breathing room as economists say there is a strong possibility that the Monetary Policy Committee (MPC) will leave interest rates unchanged next week due to a stronger rand and the international price of Brent crude oil coming down.
Professor Irrshad Kaseeram, from the University of Zululand’s Economics Department, said inflation last month rose from 4.8% to 5.4% due to food and fuel price increases, while core inflation fell to 4.5%.
“Most economists expect inflation to remain below 6% for at least the next six months, so we can expect interest rates will remain unchanged for the next six months.”
Kaseeram added however that the interest rate remained high, which would see people spend less in general.
“Saving from spending on luxury items will be shifted to food consumption. Core inflation has decreased and due to high interest rates this pattern will likely be in place into mid-2024. Thus, we should see consumers spending less on luxury and durable goods this Christmas.”
Economist Dawie Roodt agreed that signs were there that the MPC would leave interest rates unchanged.
“We have seen good signs with the rand appreciating nicely and the price of international oil coming down, and so we should expect the interest rate to remain unchanged. There are also signs that we will see a fuel price decrease in December.”
Roodt added that the consumer was still under tremendous pressure.
“We have seen not only food prices but all prices going up a lot. We are currently in a high inflation rate environment. Wages are generally not keeping up with inflation and that simply means people have less money in their pockets.
“If people have less money they will spend less and that will apply to the upcoming festive season. A concern is that this could lead to more borrowing.”
Professor Bonke Dumisa, an independent economic analyst, said he also expects the interest rate to remain unchanged.
“We have to admit that there was a big jump in inflation from 4.8% to 5.4% in September. We were worried that an interest rate hike was on the cards, however, with the petrol price looking good at the moment and possibly another fuel price decrease in December, we can expect interest rates will most likely remain unchanged.”
Dumisa added that there was a concern with food inflation.
“A huge issue we have is that food inflation has not come down below 8% in a long time and that is one of the reasons why consumers have less money in their pockets.
“We have seen that stats from retailers indicate consumers have been spending considerably less at stores in 2023.
I would also advise the public not to spend large amounts of money on Black Friday as they could end up in more debt.”
The Mercury