• SA is being scammed!

    Former struggle heroes are now emptying state coffers to benefit foreign scammers, says Solly Moeng.

  • A burning issue

    The Knysna fires have shown that SA needs to be fire-aware and wary, says Mandi Smallhorne.

  • True economic freedom

    Harping on inequality and repressive rich people deflects attention from the real issues, say analysts.

All data is delayed
See More

Inflation eases to 5.5%

Jul 18 2012 11:06

Johannesburg - South Africa’s consumer inflation slowed more than expected to 5.5% year-on-year in June from 5.7% in May, Statistics South Africa said on Wednesday.

On a month-on-month basis inflation quickened slighly to 0.2% compared to 0.1% in May.

Economists in a Reuters poll had expected CPI to ease to 5.6% year-on-year but quicken to 0.3% on a monthly basis.

Christie Viljoen, economist at NKC Independent Economists said: “The continued decline is good. I think it will stir demand from unions and businesses for lower interest rates but the Reserve Bank will keep in mind factors such as oil bouncing back and the jump in the maize price and rand weakness.

“Keeping in mind these factors, the downward trend cannot continue more than a few months and must turn around at some point.”

Said Kadd Capital economist Elize Kruger: “We are trending lower on CPI and my view is that we could be closer to 5% by the end of this year.

“I think the South African Reserve Bank (Sarb) will show a downward revision to their CPI forecast, but probably unchanged on interest rates.”

“Continuous moderation of the headline year-on-year CPI levels will alleviate the pressure on the Monetary Policy Committee’s (MPC) monetary policy decisions," said Anisha Arora an analyst at 4Cast.

“Inflation prices are dropping much faster than expected and combined with worsening prospects for domestic growth, this could prompt the MPC to cut interest rates in line with the central bank action across the more developed countries.” 

Inflation surprised the market by moderating to 5.7% last month, easing into the central bank’s 3%-6% target range after pushing outside the band in April, while economists had expected 5.95% on a year-on-year basis.

Reserve Bank governor Gill Marcus said last month inflation should remain within the 3%-6% target band through to 2014, with the main upside risks coming from a weaker rand, which hit a high of R8.71 in June.

The latest Reuters Econometer survey expects inflation to  average 5.72% this year and 5.35% in 2014.

Some in the market have started to price in the possibility that the bank could cut interest rates this year as inflation moderates.

The yield on the benchmark 2015 bond nudged higher to 5.725% at 08:20 GMT from 5.71% prior to the data at 08:00 GMT. The rand was steady at R8.1875 against the dollar.

inflation  |  sa economy



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

WhatsApp group admins in SA could face jail time their jobs

Previous results · Suggest a vote