The added tariff could help in the long-run, but over the short-term, central bank governor Lesetja Kganyago believes the increases could add 0.5 percentage point to inflation over the next year.
To meet its inflation-targeting mandate, the central bank has made it clear that it will have to hike interest rates. Medley Global Advisors anticipates a 25 basis point hike in July and another increase before the end of the year. Observers calculate that the bank’s neutral interest rate range could be as high as 7% to 7.5%, compared to current rates of 5.75%.
The economy would require many wide seeping structural reforms and infrastructure investments to help jump start the economy. However, the ruling African National Congress has been distracted with political infighting and scandals over misappropriated money.
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Max Chen contributed to this article.