SA July consumer inflation slows

SA’s inflation slowed to 6,3% in July from 6,6% the previous month, remaining above the Reserve Bank’s 3% to 6% target.

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The consumer price index has breached the upper limit of the bank’s target since March this year, prompting the Reserve Bank to increase its repurchase rate by 0,25 percentage points in July. There will be pressure on the bank to increase interest rates still further due to these figures, Chris Hart, an economist at Investment Solutions, told Farmer’s Weekly.

He forecast that food inflation would fall in the next few months as the prices of agricultural commodities have declined sharply. According to Statistics SA, food inflation appears to be moderating as prices for bread and cereals declined 1%, meat fell 0,3% and fats and oils dropped 1,4% compared to June.

“The drops are largely as a result of improved harvests of grains (maize and wheat) and oil-bearing plants (sunflowers),” said the agency said in a statement on 20 August. “Maize forms a large part of the feed for cattle and chickens.”

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The weaker rand is the stumbling block for future cuts, said Christie Viljoen, an economist at NKC Independent Economists in Paarl. He said the Reserve Bank would likely raise its repurchase rate by a further 0,25 percentage points this year. The rand’s slump against the dollar at the start of the year prompted Reserve Bank governor Gill Marcus to increase the rate by 0,5 percentage points in January.