South Africa: CPI rose 6.0% in July as political risk comes back - BBH

Research Team at BBH, notes that South Africa’s July CPI rose 6.0% y/y vs. 6.1% expected and 6.3% in June. 

Key Quotes

“SARB said inflation was still too high to ease policy.  It has kept rates steady since March, when it last hiked rates 25 bp to 7.0%.  Inflation has been above the 3-6% target range since January.  Yet the weak economy argues against further tightening, with GDP contracting -0.2% y/y in Q1. The rand will likely be the deciding factor since any sustained currency weakness could feed into higher price pressures.  The next policy meeting is September 22, and no action is seen then. 

Meanwhile, political risk is back in South Africa.  Local press reported yesterday that Finance Minister Gordhan received a “warning statement” from the Hawks police unit.  Gordhan and four former tax agency officials have been asked to appear on Thursday.  The story is obviously still developing but we think the basic takeaway is that Gordhan remains under fire and that he does not have Zuma's support to enact the needed fiscal restraint.”