We forecast a further decline in inflation, to 5.2% y/y in July, from 5.5% y/y in June, due to lower fuel and food prices. We expect a slight decrease of 4.7% y/y in core inflation in July after the robust increase in June (up 4.9% y/y, from 4.6% y/y in May).
Upside risks to CPI emanate from increases in international food prices and higher administered prices. Though the impact of higher grain commodity prices is likely to be absent in July, the pass-through to consumer prices (due to the sharpness of the increase in grain prices) is probably going to be evident in the months ahead.
We expect a gradual acceleration in CPI in the months ahead, but keeping comfortably within the target band. Given these growing risks to our forecast, we expect CPI to average 5.6% (previous forecast: 5.5%) in 2012.
The SARB is likely to keep rates on hold at 5.0% this year and next. An increase in inflation is likely to limit room to ease monetary policy further.
Cost-push pressures are expected to undermine inflation, but this could be counter-balanced by subdued demand pressures.
ZA Weekly Outlook
Inflation could fall further
Fri, Aug 17 2012, 13:16 GMT
by
Standard Bank Research Team
|
Standard Bank
Standard Bank Research Team
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