Latest news with #ConsumerPriceInflation
IOL News
2 days ago
- Business
- IOL News
What to expect from the South African Reserve Bank's interest rate decision this week
As the SA Reserve Bank prepares for its interest rate decision on July 31, economists discuss the potential for a rate cut and its implications for consumers facing rising food prices and inflation. Image: IOL / AI The prospects of a rate cut ahead of the SA Reserve Bank's (SARB) Monetary Policy Committee's (MPC) next interest rate decision on July 31, appear positive, but it's not a clear-cut case, economists said on Monday. 'The market currently expects a cut in the key repo rate by 25 basis points — which would be the third reduction this year,' said Thys van Zyl, Chief Executive of Everest Wealth Advisory. 'A lower interest rate would bring welcome relief to consumers.' He warned that while headline inflation remains relatively low, food price inflation is now at its highest level in over a year, which poses risks to interest rate expectations as well as consumer spending. Dr Elna Moolman, Standard Bank's group head of macroeconomic research, also believes the current inflation rate supports the case for an imminent interest rate cut, and although she expected inflation to rise over the coming months, it should remain 'reasonably benign'. However, Van Zyl warned that the central bank may be reluctant to cut rates too aggressively if global food and oil prices continue to trend upwards. 'Earlier this year, it was anticipated that the Reserve Bank could cut interest rates one or two more times in 2025," Van Zyl said. "Following the January and May reductions totalling 50 basis points, it's increasingly likely that we'll see only one more cut this year – and perhaps not before year-end.' Uncertainty surrounding the proposed 30% tariffs on South African exports to the US is another factor weighing on the economy, he added, as these could impact export-driven industries such as manufacturing, mining and agriculture. 'This uncertainty, combined with rising inflation, puts policymakers in a difficult position – trying to support growth while also protecting the rand and price stability.' Consumer Price Inflation (CPI) rose to 3% in June, up from 2.8% in May. This was the first time in three months that inflation returned to within the Reserve Bank's 3% to 6% target range. However, CPI remains well below the 5.2% seen this time last year. Food prices remain higher than expected, particularly red meat, after a bout of the foot-and-mouth disease, yet consumer goods inflation remains subdued. Johann Els, chief economist at Old Mutual, said the weak overall pricing pressure in the economy justifies a further 0.25 percentage point interest rate cut this week. ALSO READ: Understanding the impact of rising inflation on SA's interest rates Potentially lower inflation targets later in the year or in 2026 could also jeopardise the interest rate situation for South Africans going forward. South African Reserve Bank (SARB) governor Lesetja Kganyago has strongly advocated for the country to lower its inflation target from 4.5% to 3%. Experts argue that a lower inflation target would improve price stability, reduce borrowing costs, and enhance investor confidence in the long term. However, many feel it would entail some short-term 'pain' for the sake of long-term gain. Yet tightening monetary policy could be a dangerous move in the current economic climate, warns Frederick Mitchell, chief economist at Aluma Capital. 'Conventional wisdom suggests that raising interest rates can curb inflation, yet in the current environment, where inflation remains subdued but economic growth is threatened, tightening monetary policy may exact an economic toll without addressing the underlying trade issues,' Mitchell said. IOL Business
IOL News
2 days ago
- Business
- IOL News
Will South Africans be blessed with another interest rate cut this week?
Inflation data currently supports an interest rate cut, but it's not a clear cut case. Image: AI The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) is set to make its next interest rate decision on Thursday, July 31, and while the prospects of a rate cut appear positive, it's not a clear cut case according to economists. 'The market currently expects a cut in the key repo rate by 25 basis points - which would be the third reduction this year,' said Thys van Zyl, Chief Executive of Everest Wealth Advisory. 'A lower interest rate would bring welcome relief to consumers.' However he warned that while headline inflation remains relatively low, food price inflation is now at its highest level in more than a year, which poses risks for interest rate expectations as well as consumer spending. Consumer Price Inflation (CPI) rose to 3% in June, up from 2.8% in May. This was the first time in three months that inflation returned to within the Reserve Bank's 3% to 6% target range. However, CPI remains well below the 5.2% seen this time last year. Food prices remain higher than expected, particularly red meat thanks to foot-and-mouth disease, yet consumer goods inflation remains subdued. Johann Els, chief economist at Old Mutual, said the weak overall pricing pressure in the economy justifies a further 0.25 percentage point interest rate cut this week. ALSO READ: Understanding the impact of rising inflation on SA's interest rates Dr Elna Moolman, Standard Bank's group head of macroeconomic research, also believes the current inflation rate supports the case for an imminent interest rate cut, and although she expects inflation to rise over the coming months, it should remain 'reasonably benign'. However, Van Zyl warned that the central bank may be reluctant to cut rates too aggressively if global food and oil prices continue to trend upwards. 'Earlier this year, it was anticipated that the Reserve Bank could cut interest rates one or two more times in 2025. Following the January and May reductions totalling 50 basis points, it's increasingly likely that we'll see only one more cut this year – and perhaps not before year-end,' Van Zyl said. Uncertainty surrounding the proposed 30% tariffs on South African exports to the US is another factor weighing on the economy, he added, as these could impact export-driven industries such as manufacturing, mining and agriculture. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ ''This uncertainty, combined with rising inflation, puts policymakers in a difficult position – trying to support growth while also protecting the rand and price stability'. Potentially lower inflation targets later in the year or in 2026 could also jeopardise the interest rate situation for South Africans going forward. South African Reserve Bank (SARB) governor Lesetja Kganyago has strongly advocated for the country to lower its inflation target from 4.5% to 3%. Experts argue that a lower inflation target would improve price stability, reduce borrowing costs and enhance investor confidence in the long term. However, many feel it would entail some short term 'pain' for the sake of long-term gain. Yet tightening monetary policy could be a dangerous move in the current economic climate, warns Frederick Mitchell, chief economist at Aluma Capital. 'Conventional wisdom suggests that raising interest rates can curb inflation, yet in the current environment, where inflation remains subdued but economic growth is threatened, tightening monetary policy may exact an economic toll without addressing the underlying trade issues,' Mitchell explained. IOL Business
IOL News
5 days ago
- Business
- IOL News
Inflation rises in June, but optimism for a repo rate cut remains
Despite a rise in inflation in June, there is optimism that the South African Reserve Bank's Monetary Policy Committee will announce a repo rate cut when it meets next week. Image: File Despite Consumer Price Inflation (CPI) rising to 3% in June, there is still optimism that the South African Reserve Bank's Monetary Policy Committee (MPC) will decide to cut the repo rate by 25 basis points next week. The MPC meets next Thursday. At the last meeting in May it cut the interest rate to 7.25%. The CPI has risen from 2.8% in May. Trade union UASA's spokesperson Abigail Moyo said the rise in inflation is troubling, especially since it had been below 3%—the lower limit of the SARB's target band—between March and May. The union noted that according to Stats SA, the main contributors to the annual inflation rate were housing and utilities, which increased by 4.4%, and food and non-alcoholic beverages, which rose by 5.1%. Additionally, household electricity and gas prices increased by 11% compared to the previous year, primarily due to recent Eskom price hikes. Eskom's electricity tariffs increased in April, while municipal power tariffs took effect in July. 'This has posed significant financial challenges for many consumers, evidenced by recent protests organised by Tembisa residents against these tariff increases.' However Moyo said the inflation rate, while slightly higher, remains in line with inflation targets and expectations, potentially supporting a cut in the repo rate by 25 basis points to 7% next Thursday. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading 'UASA hopes the MPC will consider the positives in its repo rate decision and that fuel prices will decrease in August, benefiting consumer spending. We further hope that inflation will stay within the 3% target range or lower.' Bradd Bendall, BetterBond's national head of sales said BetterBond's data for July shows that bond applications have risen by 7.4% for the 12 months to May 2025, with home loans granted up by an impressive 13.6%. 'This points to renewed buyer confidence and a more stable market environment. Driving this upward trend is the recent easing of interest rates.' Bendall added that with inflation recently comfortably within the 3 to 6 percent target range, another 25 basis point rate cut was expected next week. 'This would drop the prime lending rate to 10.5% - last seen in November 2022. Although not quite at pre-pandemic levels, this cut would bring welcome relief to homeowners and consumers. On a R2 million bond, for example, the lower prime lending rate would mean a saving of just over R300 a month. 'This potential cut aligns with global monetary policy trends. Both the Bank of England and the Reserve Bank of India are both expected to reduce rates in August, suggesting a broader shift toward interest rate easing to stimulate economic activity.' THE MERCURY
Time of India
13-07-2025
- Business
- Time of India
Gold market outlook: Prices to stay firm next week; risk aversion, weak dollar to fuel gains
Representative image Gold prices are expected to remain firm in the upcoming week, supported by heightened global risk aversion, sustained weakness in the US dollar index, and a series of trade-related developments as key supporting factors, analysts said. They further added that investors will be focusing on key US data releases, including Consumer Price Inflation (CPI) and retail sales figures, which could offer further cues for bullion prices. Jateen Trivedi, VP, research analyst, commodity and currency at LKP Securities, said gold is likely to remain strong as long as it stays above Rs 97,000 per 10 grams on the MCX. 'Renewed trade tariff jitters and continued weakness in the dollar index are amplifying global risk aversion, prompting a shift away from risky assets toward safe-haven instruments like bullion,' Trivedi said, adding that a weak rupee may further support the upward trajectory of the yellow metal's price. Last week, the yellow metal futures for August delivery rose Rs 842, or 0.86 per cent, on the Multi Commodity Exchange (MCX). Hareesh V, head of commodity research at Geojit Investments, said gold started the week on a weaker note as easing tensions between Israel and Iran, along with stronger-than-expected US non-farm payroll data, dampened safe-haven demand. However, prices rebounded after US President Donald Trump imposed fresh tariffs ranging from 35 to 50% on Canada and Brazil, reigniting fears of a trade war and lifting bullion demand. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Esta IA está generando ingresos (Ver más) Finanzas y economía Empieza ahora Undo Traders are also watching the ongoing negotiations between India and the US for a potential trade deal, which could influence market sentiment, Hareesh V said, quoted by PTI. Prathamesh Mallya, DVP, Research, Non-Agri Commodities and Currencies at Angel One, said gold prices have surged nearly 3 per cent on the MCX, rising from Rs 94,951 per 10 grams on June 27 to Rs 97,830 on July 11. Internationally, Comex gold futures have jumped around 2.8% over the same period. Mallya attributed the gains to the Trump administration's aggressive tariff stance on commodities like copper, aluminium, and pharmaceuticals. President Trump's signal that the August 1 tariff deadline will not be extended has added to market uncertainty. 'Gold typically performs well during such periods of elevated risk,' Mallya said, projecting a possible move towards $3,500 per ounce and Rs 1,00,000 per 10 grams on the MCX in the near term. On Friday, Comex gold futures for August delivery rose $38.30, or 1.15%, to close at $3,364 per ounce. N S Ramaswamy, head of commodities and CRM at Ventura, said gold's key resistance of $3,360 has been tested and a decisive break could trigger further gains, even as the US dollar remains firm and on a recovery path. Geopolitical tensions, including potential US sanctions on Russia and the threat of more tariffs, could continue to support gold's appeal as a safe-haven asset, Ramaswamy added. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
The Hindu
01-07-2025
- Business
- The Hindu
Tamil Nadu government to absorb the burden of the hike in electricity tariff through subsidy for domestic consumers
The Tamil Nadu Electricity Regulatory Commission (TNERC) has issued the new tariff order for the financial year 2025-26 based on the Consumer Price Inflation (CPI) index which will come into effect from Tuesday (July 1). As per the TNERC tariff order the escalation rate of the CPI has arrived at 3.16% based on the CPI index of April this year against April last year. However, the TNERC order has stated that the State government through a letter dated June 30 has issued a policy directive to compensate for the revenue loss to Tamil Nadu Power Distribution Corporation Limited (TNPDCL) through subsidies instead of passing the burden on to various categories of consumers. As per the new tariff order, the energy charges have increased from 0.15 paise to 0.35 paise for domestic consumers consuming `between 400 units to more than 1,000 units bi-monthly. There is also a minor price hike for electricity consumers for cottage and micro industries, power looms, industries and information technology services, construction activities, and electric vehicle charging stations. According to a press release issued by Transport and Electricity Minister S.S. Sivasankaran, the State government would be bearing an additional burden of ₹519.84 crore due to the new tariff revision issued for various sets of electricity consumers. In addition bearing the hike announced for domestic consumers, the State government would be bearing the additional price hike for cottage and tiny industries, power loom consumers, and industrial consumers consuming upto 50 kilowatt (KW). A total of 2.83 crore electricity consumers are in the State.
