South Africa's consumers brace for rising prices as inflation returns
The Consumer Price Index (CPI) came in at 2.8% year-on-year in May. According to Investec chief economist Annabel Bishop, the rate is likely to rise to 2.9% in June and 3.1% in July. The change is largely attributed to the fading impact of base effects from 2024 and higher prices for administered services.
As a result of growing risks to inflation, Bishop said the Reserve Bank is unlikely to cut interest rates at the MPC meeting this month, having cut by a full percentage point since September last year. She explained that the recent fuel price hike will add 0.1 percentage points to inflation in the July print. Statistics South Africa will release CPI data on July 23.
Bishop noted, however, that there may be another cut in November, which could take the prime lending rate down to 10.5%. As the inflation rate is likely to end the year at 4%, she said SARB may cut the rate even further, which would take prime down to 9.5%.
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