ETTIENNE LE ROUX: Why the Reserve Bank is right to hike rates
The Reserve Bank is in hiking mode but not everyone is impressed with the strategy
Those critical of the Reserve Bank’s approach typically have the following argument. Supply disruptions stemming from the war in Ukraine are a key factor fuelling the oil price. Couple this with steep price increases of other imports such as fertiliser, edible oils and wheat, also caused by the war, and the cost of agricultural output and food manufacturing is surging. In this environment, there is little the Bank can do to rein in rising petrol or food prices, and thus headline consumer inflation. So, why hike interest rates?
The first part of the answer is rising core inflation. Twelve months ago, consumer inflation, excluding petrol and food prices, was 3.4% year on year. In May, it stood at 4.6%. This shows consumer-facing companies are increasingly able to raise prices to recover, or at least partially recover, surging costs arising from pricier international shipping, local transport and packaging. And worryingly, the responses of a sample of retailers (and wholesale...
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