People were advised to be extra careful this year when spending as they will start to feel the pinch from escalating food and petrol prices, high interest rates and the effects of the Nation South African inflation which climbed above 9 percent in February for the first time in almost five years, which added to speculation the central bank may resume raising interest rates.



Despite the attempts of the Reserve Bank to lower inflation by raising interest rates four times in 2007 the inflation rate has kept rising . The rand's 15 percent slump against the dollar this year and a proposed 60 percent increase in electricity costs threatens to keep inflation above the target.

The Reserve Bank's credibility is at stake. The inflation numbers may be too dramatic for them to do nothing.

This is further confirmed by Governor Mboweni's prediction that the drop in value of the Rand will hold inflation above the usual for a longer time than expected. Since the central bank predicted that the interest rate would start dropping down within acceptable range after the first quarter of 2008 and we seem to be going in the opposite direction that is not helping the Reserve's reputation or credibility

The main reason for the current food inflation is a high global demand for wheat products, which puts an upward bias on local food prices. Other factors include grains, biofuel production and the demand for protein feed.

The effect of the increasing oil price on the price of gasoline has been a spike in prices. There has been a strong demand growth for oil from emerging markets such as China and India and this, in turn, has sent oil prices shooting up. .

How does the average South African citizen persist through such economic turmoil and what is likely to come? This, of course, is a question with many small answers, not one big one. One can be certain, at least, of where the answer won't come from. It won't be from the government or the corporations or the bankers. Keep an eye out for individual innovations and grassroots movements.

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