After several years of subdued pass-through of intermediate costs to consumer prices, margin pressure appears to be reversing. Alongside stronger economic growth than expected, these developments raise the prospect that higher import prices feed through more directly to consumer prices.
Wage settlements during the first half of this year have come in above inflation1, further squeezing margins of firms and raising the prospect of more entrenched wage inflation. The SARB’s Monetary Policy Committee (MPC) has moved to normalise rates, raising the repo rate by a cumulative 200 basis points since November 2021.