Is enough being done to rein in administered prices and excess costs caused by infrastructure failures?
02 April 2024 - 14:09
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The SA Reserve Bank’s latest statement provides a fresh opportunity for the current government, opposition parties, policymakers and citizens to ask whether enough — if anything — is being done to assess and reduce the upward pressures exerted on inflation by administered prices, as well as by factors that affect the supply and production of materials, components, goods and services (“Hawkish Reserve Bank signals later and fewer rate cuts”, March 27). These factors include the fuel price, the cost of transporting goods via rail and road, and delays at ports and border posts.
The Bank expects a slower decline to the 4.5% headline inflation target, explaining: “We still see headline inflation heading back to 4.5%. However, given extra inflation pressure, headline now reaches the target midpoint only at the end of 2025, later than previously expected. As a result the policy rate in our baseline forecast also starts normalising later.”
While the government cannot control global inflation — and unforeseen events such as the conflict between Israel and Hamas (and other disruptions to trade as is the case in the Panama Canal), along with their respective effects on global trade — the government has ample choice and control within its macro-policy framework to lower costs that make farming, manufacturing, production and trade more expensive than these various economic activities could be.
In trade infrastructure and policy too, the inefficiencies and problems that plague the country’s ports and railways delay and make more expensive the movement of goods and materials — with overall economic activity suffering as a result.
The Reserve Bank can try to use monetary policy to drive down inflation. However, it is fighting with both hands tied behind its back when the rest of government and state-owned enterprises are making decisions that drive up costs in the wider economy.
Chris Hattingh Centre for Risk Analysis
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: Reserve Bank has its hands tied
Is enough being done to rein in administered prices and excess costs caused by infrastructure failures?
The SA Reserve Bank’s latest statement provides a fresh opportunity for the current government, opposition parties, policymakers and citizens to ask whether enough — if anything — is being done to assess and reduce the upward pressures exerted on inflation by administered prices, as well as by factors that affect the supply and production of materials, components, goods and services (“Hawkish Reserve Bank signals later and fewer rate cuts”, March 27). These factors include the fuel price, the cost of transporting goods via rail and road, and delays at ports and border posts.
The Bank expects a slower decline to the 4.5% headline inflation target, explaining: “We still see headline inflation heading back to 4.5%. However, given extra inflation pressure, headline now reaches the target midpoint only at the end of 2025, later than previously expected. As a result the policy rate in our baseline forecast also starts normalising later.”
While the government cannot control global inflation — and unforeseen events such as the conflict between Israel and Hamas (and other disruptions to trade as is the case in the Panama Canal), along with their respective effects on global trade — the government has ample choice and control within its macro-policy framework to lower costs that make farming, manufacturing, production and trade more expensive than these various economic activities could be.
In trade infrastructure and policy too, the inefficiencies and problems that plague the country’s ports and railways delay and make more expensive the movement of goods and materials — with overall economic activity suffering as a result.
The Reserve Bank can try to use monetary policy to drive down inflation. However, it is fighting with both hands tied behind its back when the rest of government and state-owned enterprises are making decisions that drive up costs in the wider economy.
Chris Hattingh
Centre for Risk Analysis
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
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