Johannesburg - The consumer price index (CPI) slowed to 6 percent year on year last month from 6.3 percent in June, raising hopes that the SA Reserve Bank could hold off interest rates hikes when its monetary policy committee (MPC) meets next month.
Data from Statistics SA showed the CPI fell to its lowest level this year, bringing the inflation to within the bank’s 3 to 6 percent target range.
Investec’s Kamilla Kaplan said the improved inflation profile and a stable rand exchange rate strengthened the argument for no further interest rate hikes in this tightening cycle.
“Economic growth prospects remain poor and downside risks persist. However, as the (Reserve Bank) has retained its relatively hawkish bias in recent communication, the risk remains of one more interest rate hike around year end,” Kaplan said.
Reserve Bank governor Lesetja Kganyago said the bank’s policy stance would remain flexible.
Kganyago said sharp increases to food inflation contributed to high wage demands in a stalling economy struggling to create jobs.
“One of the things we need is for price and wage demands to abide by the inflation target, so that we achieve a lower inflation rate more consistently,” he said.
Food price inflation increased by 11.5 percent year on year, while bread and cereals inflation rose 15.1 percent and meat inflation came at 6.4 percent year on year.
Core inflation - which excludes the prices of food, non-alcoholic beverages, petrol and energy - was up 5.6 percent to 5.7 percent year on year.
MMI Investments and Savings economist Sanisha Packirisamy said high food prices were still behind the sizeable gap in inflation between low- and high-income earners.
“Since 2009, the inflation gap between high-income earners and low-income earners has averaged 0.8 percent. This is likely partly owing to food inflation averaging 6.6 percent over the same time period.
* With additional reporting by Reuters
BUSINESS REPORT