The SA Daily
16 August 2019
CPI on the cards next week
Shireen Darmalingam
- Statistics South Africa releases the July CPI print next week. Bloomberg consensus expectations are for CPI to have moderated to 4.3% y/y in July from 4.5% y/y in June. Recall, food inflation increased to 3.2% y/y in June, from 2.8% y/y in May and a 2.3% plateau from January to April. We expect food inflation to continue increasing in the months ahead on the back of increases in agricultural grain prices while the impact of foot and mouth disease fades. Fuel prices increased 0.8% m/m and by 7.4% y/y in June, which helped lift overall inflation in June.
- Despite the improvement in inflation in June, we expect CPI to still average 4.4% in 2019 with a marginal increase to 4.7% in 2020. The SARB also expects inflation to come in at 4.4% in 2019. CPI for 2020 is expected at 5.1% and at 4.6% in 2021.
- The SARB is likely to keep policy rates unchanged at the next two MPC meetings before year-end due to the rand’s weakness incurred by a number of local and global risk factors. The rand has weakened by 9% since the last MPC meeting in July. The bank noted that future moves are likely to remain data dependent and reiterated its view to anchor inflation expectations at the mid-point (4.5%) of the target. The bank’ s model was for one cut of 25 bps in Q4:19; the bank noted that the implied path remains a broad policy guide and that it could change in either direction in response to risks. Trade tensions and the impact on sentiment and investment was cited as a key concern as well as geopolitical developments and high levels of corporate and sovereign debt.
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