Meanwhile, it also seems that the South African Reserve Bank (SARB) is unlikely to temper its monetary policy after headline inflation remained stubborn on the back of rising education fees. Picture: Ayanda Ndamane/ Independent Newspapers
IT SEEMS the new month of May won’t be bringing consumers much reprieve as petrol prices are expected to be hiked once again.
This comes after the AA warned this past week of another petrol price hike in May that will push the cost of living even higher for financially constrained consumers, as inflation also remained sticky above 5% in March.
The AA said the latest unaudited data from the Central Energy Fund (CEF) indicated that the petrol price would again increase by 37c/litre in May, pushing the price close to R25.15/l from the current R24.78/l.
South African fuel prices have reached record-high increases over the past three years despite the government not increasing the general fuel or Road Accident Fund levies.
This year, the petrol price has already risen from R22.17/l recorded in January on higher Brent crude oil prices as a result of geopolitical risk or attacks on oil cargoes in the Middle East, particularly the Red Sea, and the depreciation of the rand against the US dollar.
The price of unleaded 93 petrol inland in May 2022 cost R21.51/l, but increased to R23.01/l in May 2023.
The AA said the outlook for unleaded 95 inland was not much better, with the CEF data showing an increase of 38c/l.
It said this would push the price of this fuel to around R25.50/l, higher than the R25.42/l seen in August 2022, but not quite the record price of R26.74 in July that year.
Despite this bad news, the AA said diesel was set to decrease by 35c/l, while illuminating paraffin was also set to drop by 28c/l.
“The decrease to diesel prices is especially welcome as it will not result in higher input costs across various sectors, and this won’t be a driving factor in consumer prices increasing,” it said.
Meanwhile, it also seems that the South African Reserve Bank (SARB) is unlikely to temper its monetary policy after headline inflation remained stubborn on the back of rising education fees.
Data from Statistics SA (Stats SA) this past week showed that the rate of annual consumer price inflation (CPI) softened to 5.3% in March, down from 5.6% in February.
Stats SA said core inflation recorded a modest decline, from 5.0% to 4.9% in March.
Last month, the SARB warned that its baseline forecast showed the policy rate normalising later as headline inflation was now forecast to reach the target midpoint of 4.5% only at the end of 2025, later than previously expected.
The SARB is targeting inflation to drop from the upper limit towards the midpoint of the target range before it can relax its restrictive monetary policy stance of 8.25% per annum, with the prime lending rate currently at 11.75%.
Compounding this picture is the US Federal Reserve which left the Fed funds rate steady at a 23-year high of 5.25% to 5.5% for a fifth consecutive meeting last month.
Frank Blackmore, chief economist at KPMG South Africa, told Business Report: “Hopefully, there will be more reductions to come. This the expectation. However geopolitical events, issues in the Middle East, as well as with transport routes, the Suez Canal, the Red Sea routes, etc, these aspects are adding pressure to prices within all the economies and that might mean inflation remains higher for longer, meaning that interest rate reductions that were expected to start may be pushed later into 2024.“
Hayley Parry further told Business Report: “The next Monetary Policy Committee meeting is scheduled for 30 May and this inflation data is going to be important and considered in that meeting.
“In terms of the MPC, they are going to be looking at a mixed bag of information, the latest stats out of the USA showed that inflation there is not under control and that they may delay decreasing interest rates there, and what that means from a South African perspective is that typically our MPC often follows suit in terms of what the Fed is doing.
“I think from a consumer perspective, what we need to know is that it is probably just going to be a rocky road ahead.”
Parry added: “We are not sure which way it’s going to swing, so even though there was a softening of this inflation rate, it is still not quite where the SARB is wanting it.
“So, that target range of 3% to 6% – it’s sitting inside there but the SARB would like that inflation rate around the midpoint range of 4.5%, and so it’s obviously not there and the result for us as consumers is that our repo rate has been at an almost 15-year high of 8.25% since May 2023.
“Based on these figures, it’s hard to know whether this is enough for the Monetary Policy Committee to start decreasing rates. Chances are they may leave it as it is, and we just need to brace ourselves as this decrease in interest rate cycle that we were all looking forward to may be on hold or delayed a little further than we would like,” Parry said.
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