Higher inflation could see an interest rate hike today
Image: ChatGPT
South Africans are being squeezed from almost every direction at once as economists expect the South African Reserve Bank (SARB) to raise interest rates today.
This comes as consumers are already battling shrinking salaries, rising living costs and mounting debt. South Africa’s headline inflation rate climbed to 4% in April – a 19-month high – while PayInc said May inflation was forecast to rise further to around 4.6%.
Most economists and market commentators now expect the SARB to raise rates by 25 basis points this week, lifting the prime lending rate from 10.25% to 10.50%.
Data released ahead of this afternoon’s Monetary Policy Committee interest rate decision paints an increasingly bleak picture for households, with higher earners now spending more than their monthly salaries on debt servicing, while the buying power of wages has fallen to its lowest level in two years.
There is some reprieve following two months of punishing fuel increases. June could see some much-needed relief at the fuel pump. While diesel is still looking set for a significant decrease, the phase-out of Treasury's fuel tax relief measures means that a petrol price increase is likely.
Late-month data from the Central Energy Fund showed that the price of petrol should theoretically decrease by between 25 cents (93 unleaded) and 21 cents (95 unleaded) from the beginning of June.
A far more significant over-recovery has developed for diesel, with the same data set indicating decreases ranging from R4.60 at 50 ppm to
R5.29 at 500 ppm.
However, the government has indicated that the fuel tax reprieve, announced at the beginning of April, will be halved from June 3, then phased out at the beginning of July. This means an additional R1.50 needs to be worked into the petrol price, and R1.96 into the diesel price.
With this factored in, South Africans are facing a petrol price increase of around R1.25, while the diesel decrease could be limited to between R2.64 for 50 ppm and R3.33 for 500 ppm. This follows the sharp increases implemented in April and May.
June's predicted adjustment could see 95 unleaded petrol reaching all-time highs of R27.01 at the coast, surpassing the previous July 2022 high of R26.90, while Gauteng residents will now pay in the region of R27.88. The wholesale price of 500ppm diesel is likely to fall to R27.84 in Gauteng.
However, the Slate Levy, which added R1.22 to May's fuel price, could introduce another variable to June's official fuel price, which will be announced early next week. This levy compensates fuel companies for price fluctuations in the previous month.