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SARB sees new power prices adding to inflation

29th March 2019

By: Bloomberg

  

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South Africa’s electricity tariff increases could push the inflation rate up by 0.75 percentage point, Reserve Bank deputy governor Kuben Naidoo said.

The nation’s energy regulator said this month Eskom could raise electricity prices by 9.4% from April 1, taking the total increase to 13.8%. That was almost 50% more than the assumption the central bank used in its latest projections for 2019, which forecast inflation would stay below 5% this year.

The Reserve Bank increased its key interest rate for the first time in more than two years in November, even as the economy had just come through a recession and had not expanded at more than 2% annually since 2013. It kept borrowing costs on hold in January and trimmed its projection for policy tightening as it lowered its inflation forecast.

While the central bank did not position itself as being in a hiking or softening cycle, “it is no secret that the US is now in a softer interest-rate cycle and this will lessen pressure on the rand”, Naidoo said at a conference in Cape Town.

Inflation slowed to a ten-month low of 4% in January.

Edited by Bloomberg

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