23 May 2019

South Africa: Moderate CPI Data Supports Case for SARB to Hold Rates - and Maybe Talk About Cuts


Consumer inflation in South Africa braked slightly in April 2019, supporting the view that the Reserve Bank will keep rates steady at the Thursday 23 May meeting of its Monetary Policy Committee. Given that inflation remains subdued because of weak demand and anaemic economic growth, there may be a case for the bank at least to contemplate when a cut may be on the table.

South Africa's main consumer inflation number (CPI) slowed in April to 4.4% from 4.5% in March, Statistics South Africa (Stats SA) said on Wednesday, the day before the South African Reserve Bank unveils its decision on interest rates at the conclusion of its three-day Monetary Policy Committee (MPC) meeting. This is the 25th straight month that the rate has been inside the upper limit of the Reserve Bank's 3%-6% target range. So, as the market widely expects, the main lending rate is likely to remain unchanged at 6.75%.

The data does contain some promising trends. Food inflation remained at 2.3% for the fourth month running, easing the burden on lower-income households which spend a large portion of their income on calories. This may temper wage demands in upcoming pay negotiations in sectors such as platinum...

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