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South Africa’s inflation rate is at a 4-year low. 5 reasons why it matters…

Also read the following related article:

* Inflation falls to four-year low

ETM Analytics Managing Director and Economist George Glynos discusses five reasons you should care about Wednesday’s great inflation figure:

  1. The rate of inflation gives a sense of price pressures that affect households through costs that affect disposable income.

  2. It gives you a sense of where to aim when negotiating annual wage increases.

  3. It gives you a sense of the rate at which every rand you have loses its purchasing power. This loss of purchasing power is, ultimately, reflected in rand weakness.

  4. It gives the South African Reserve Bank a sense of where interest rates should be and whether they should promote savings or, conversely, consumption.

  5. Gives insight into the rate at which debt (if constant), such as a home loan, depreciates relative to inflation adjusted earnings.

This drop in inflation is unlikely to be sustained for long.

Not everything is included in the inflation rate.

It’s rare that an economy does well when its currency is weakening.

Also read the following related article:

* Inflation falls to four-year low

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