Inflation risks undermine case for equity investors, research says

“The prospect of stagflation as South Africa experiences relatively low economic growth with rising inflation” dims prospects across the board, with the exception of food retail, according to analysis from UK-based Salmour Research. “Should interest rates have to rise due to rising inflation, the effect could potentially be devastating for South Africa.”

South Africa’s key interest rate stands at a record low of 3.5% following a series of cuts in 2020 to counter the fall-out from Covid-19. This year, the monetary policy committee has consistently indicated that the next move will be up. Annual inflation rate rose to 5.0% in September from 4.9% in August, above the midpoint of the central bank’s target range of 3% to 6%.

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