ECONOMIST Doctor Azar Jammine says the South African Reserve Bank needs to take drastic action as inflation rises higher than it wants it to be.
The bank’s Monetary Policy Committee will start its meeting on Wednesday amid expectations of an announcement on Thursday that interest rates will go up by at least 50 basis points.
Inflation is now at 6.5% and unions are demanding huge wage increases for their members in light of the rising cost of living.
As wage negotiations season gather momentum unstable labour relations have started to emerge.
Jammine says the bank is in a tight spot.
“Unfortunately, the Reserve Bank has been adamant that it needs to try and dampen inflation expectation and this has risen sharply as a result of higher food and fuel prices and what’s going on internationally. And more recently we’ve had rand weakness as well which will add to those inflationary pressures. And as a result, the general expectation is that the repo rate is going to be raised by another half a percentage point on Thursday and could rise further later this year,” says Jammine.