Inflation to reach 7% by year end – economists

South Africa’s consumer inflation rate may surge to about 7% by the end of the year, and the repo rate – the rate at which the Reserve Bank lends money to commercial banks – might increase by up to a percentage point, excluding the 50 basis point increase in January.

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This was according to economists interviewed by Farmer’s Weekly. Vuledzani Patience Ndou, a senior economist with, expected the inflation rate to jump out of the Reserve Bank’s target range of 3% to 6% and “therefore decisions like increasing the interest rate have to be taken to bring down inflation and also try to strengthen the rand,” she said.

Laura Campbell, an economist at Econometrix concurred with Ndou. “Under such circumstances, the Reserve Bank is likely to increase interest rates a little further over the short term, despite evidence of fairly soft real economic activity.”