- South Africa's inflation has eased to to 2.1%, the lowest level recorded in 15 years
- This is largely due to the drop in fuel prices which was a result of the Covid-19 pandemic
- The eased inflation rate might push the Reserve Bank to lower interest rates when it meets next week
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South Africa’s inflation rate dropped below the central bank’s target range for the first time in 15 years in May due to lower fuel prices.
Annual consumer inflation for May eased to 2.1%, the lowest reading recorded since September 2004. By comparison, inflation in April registered at 3%, according to Stats SA.
FNB economists said in their weekly economic outlook that the fall in petrol prices due to the Covid-19 pandemic helped push down the inflation rate.
News24 reported that transport prices decreased 8.4% in May, while food and non-alcoholic beverages prices increased by 4.4%. Housing and utilities prices increased by 4.5%.
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With inflation contained, the Reserve Bank may consider again cutting interest rates at its meeting next week in an effort to stimulate consumption. The Reserve Bank has already cut interest rates by 275 basis points this year in response to the impact of Covid-19 on the South African economy.
The Reserve Bank also forecasts an economic contraction of 7% in 2020 and projected average inflation below 3% for the second and third quarter, said Bloomberg.
Meanwhile, Briefly.co.za reported that the unemployment rate increased to its worst level in 10 years. The unemployment rate increased to 30.1%, meaning one third of all able workers in South Africa are without jobs.
The number of employed people also dropped by 38 000 between January and March. The last time the unemployment was above 30% was in the third quarter of 2002 when it reached 30.4%.
This rate is also expected to increase as South Africa continues to suffer economic damages due to the Covid-19 pandemic.
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