Economist Dr Azar Jamin says the Reserve Bank needs to take drastic action as inflation rises higher than it wants.
The bank’s monetary policy committee will begin its meeting on Wednesday amid expectations of an announcement on Thursday that interest rates will rise by at least 50 basis points.
Inflation is now 6.4% and unions are demanding huge pay rises for their members in light of the rising cost of living.
As the salary negotiation season gathers pace, volatile labor relations have begun to emerge.
Jamin says the bank is in trouble.
“Unfortunately, the Central Bank has been adamant that it needs to try to lower inflation expectations and they have risen sharply as a result of higher food and fuel prices and what is happening internationally. And we’ve also had weakness in the rand recently, which will add to that inflationary pressure. And as a result, the general expectation is that the repo rate will be raised by another half a percentage point on Thursday and may go up further later this year,” says Jamin.