Fuel price drop to slash inflation
A DROP in fuel prices today should help bring inflation under 5% within two months, boosting the chances of an interest rate cut this year, Stanlib chief economist Kevin Lings says.
On Friday, the Department of Energy’s Central Energy Fund announced the Gauteng price of 93 octane petrol will drop by 69c to R12.63 a litre, and 95 octane petrol will drop by 68c to R12.86 a litre.
Petrol price competition is prohibited in South Africa, with all garages required to charge the same amount depending on whether they are classified as “inland” or “coastal”.
Some competition is permitted for diesel, where the government sets the wholesale price and garages can set their own profit margin.
The wholesale price of diesel will fall 60c a litre today.
Lings said in a note emailed on Sunday that July’s drop would take the price of 95 octane petrol down 10.6% from the record high of R14.39 a litre reached in April 2014, and 48c a litre below the price a year ago.
“The petrol price decline in July will reduce the monthly consumer inflation rate by a massive 0.3 percentage points – based on the new consumer price index (CPI) weights.
“This outcome is obviously encouraging and welcome news for consumers, but it is also good news from a monetary policy perspective,” Lings said.
South African consumer inflation remained inside the Reserve Bank’s target range at 5.4% in May, and Lings expects it to move below 5% over the next two months, remaining inside the target until at least the end of next year. — BDLive