Guiding consumers since 2009

Inflation down to 8%

By Staff Writer

It's a recession. The whole world is either in recession or full blown depression. We are not as bad off as many other countries and a lot of this is due to the effects of the National Credit Act and the policy of inflation targeting. When the last gasp was being pushed into the bubble just before it burst, here in South Africa we were complaining that we were being punished by sky high interest rates. Now we are not anywhere as near as bad as we could have been if we had access to all that risky credit we were clamouring for. And inflation has been coming down all year, although it is still out of the target band at 8 percent. So what does this mean for you?

 

  • Interest rates are linked to inflation
  • Inflation drives food costs
  • Your budget is shrinking

 

The effects of the global crash are somewhat less onerous here than elsewhere and there has been some positive economic data out. The leading indicators which measure expected market conditions in the future are swinging to the positive end of the spectrum which means that we can expect our downturn to be relatively short and not quite as painful as it could be. But prices are still going up even if nowhere near as fast as last year, and the drop in inflation of 0.4% is rather small, but positive. The thing with macro economics, stuff like inflation and interest rates, is that they take a long time to manifest. Aggressive interest rate cutting only started to brake inflation months after it was implemented, and many see it as a blunt tool. The government is not expected to change position on this however.

So it is expected that there will be one more rate cut tomorrow June 25 2009, of a guesstimated 50 basis points or half a percent. It is expected that this will be the last rate cut this year and should be all the stimulus that we need, but the time lag between implementation and effect means that it is very hard to call what the actual on the ground effect of these policies will be. Food prices which are a major factor in inflation are dependent on issues from last year's high interest rate environment and the extra costs are still being passed through to the consumer. At the end of the day it comes down to knowing what is in your budget and planning accordingly. If you can expect prices to rise on average by 8 percent then you can factor this in.

Recent Articles

Featured What’s the deal with underwriting?

When you apply for a long-term insurance policy, a financial adviser will ask some personal questions about your lifestyle, family history, health, and even ask you to take some medical tests. This process is called underwriting, but is it really necessary?

 

How are you taxed on your retrenchment package?

Unemployment is one of the biggest problems in South Africa. The emergence of the Covid-19 pandemic has exacerbated the situation with a lot of companies retrenching their employees.  When retrenched, you’ll receive a retrenchment package, but do you know how much tax you’re liable for?

Car repossessed – don’t be taken for a ride

When the country is facing an economic downturn, chances are your finances will feel the pinch. This can lead you to make bad financial decisions such as skipping your vehicle payments. But every decision has consequences and if you don’t pay your instalment, the bank will repossess your car. But what can you do when this happens?

 

Why you should consider gap cover

Your medical aid should protect you from incurring large medical bills when you’re sick. But what if your plan doesn’t cover the full cost of your medical expenses? We got in touch with insurance experts to find out whether gap cover is worth having.

Deals

Office furniture at discounted prices at BDK

Price: Available on request
When: Daily
Where: Johannesburg

Da Vincis Happy Hour Special

Price: Available on request
When: Daily
Where: Cape Town

Use your Absa card and get 30% cashback at Dis-chem

Price: Available on request
When: Daily
Where: Nationwide


Latest Guide

Guide to debt rehabilitation solutions