Fuel price, electricity tariff hikes raise concerns of inflation knock-on effect

The Reserve Bank has set it's inflation target of between 3% and 6% and there were concerns that a double blow of electricity and fuel price increases would affect this.

South African Reserve Bank (Sarb) Governor Lesetja Kganyago. Picture: @SAReserveBank/Twitter

JOHANNESBURG - With major increases in petrol prices and electricity tariffs this month, there are concerns about the knock-on effects on inflation.

Fuel prices shot up at midnight, with 93 octane petrol increasing by 95 cents a litre, while 95 octane increased by one rand.

Diesel increased by between 63 and 65 cents.

The cost of electricity also went up by 15% this month.

READ: Concerns over rising cost of living after power, fuel price hikes kick in

The Reserve Bank has set its inflation target of between 3% and 6% and there were concerns that a double blow of electricity and fuel increases would affect this.

Chief economist at Stanlib Asset Management, Kevin Lings: "It also means that the Reserve Bank pretty much has no choice now but to keep interest rates on hold at best, so the prospect of an interest rate cut goes out of the window."

He said that consumers were also battling with low salaries.

"And then factor in the fact that most people's salaries are not going up or barely increasing by 3% or 4%."

The IMF has revised the country's growth forecast to 3.1% for this year but there were concerns that this may be affected by poor consumer spending.

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