The 412 goods and services in the basket are classified into 12 broad groups, such as food and non-alcoholic beverages, clothing and footwear, health, transport, and education. 

Year on year the average price is measured and currently CPI is 5,9% which  is at the top of the target of 6%. Which means one rand is now worth 94,1cents from 12 months ago. The main culprits of the increase are petrol and electricity.

So how does that affect you and me?

The purchasing power of our rand is an important measurement of our cost of living into the future. If we expect to improve our livelihood then we need to ensure that the rand maintains value as much as possible.

The Reserve Bank keeps a check on the rate of inflation targeted between 3 and 6% and then makes a call on the interest rate. 

Reduces disposable income

If the interest rate is raised we have to pay more for debt on your car, bond, credit card, overdraft, personal loan and store card leaving less disposable income to spend on items in the basket. This slows down the cost of goods and services.

Improves savings

It also encourages savings as interest rates become more attractive. The average money market rate is around 4% currently. The rate increase will take this to 4,25%.

Target debt

The new interest rate on savings are still behind the inflation rate which means that your savings are not growing in real terms. Your rand is still negative in value year on year.

You will still be better off targeting your debt in the short term as the interest rate charged is much higher that the savings rate earned. The interest rate cycle is on its way up which means that the future cost of debt will be even more costly. Reducing your debt sooner will save you that much more in the long run.