Analysts anticipate inflation to have reverted to the Reserve Bank’s target range of 3 to 6% after rising persistently for over a year. This comes as Statistics South Africa prepares to release the consumer price inflation figure for June 2023.
It is further expected that the Reserve Bank will leave interest rates unchanged this week due to a recovery in the rand and the anticipated slowdown in inflation.
Inflation slowed down to a 13-month low in May to reach 6.3% from 6.8% in April 2023.
Food inflation has been the biggest driver of the consumer price index.
A Chief Economist at Investec, Annabel Bishop, says inflation is expected to ease significantly before rising again after July due to base effects.
“We expect that CPI inflation in South Africa will drop towards 5.5% for the June reading. In fact, we actually have a figure of 5.4% which is well within the Reserve Bank inflation target of 3 to 6%. This will be the first month that South Africa’s inflation falls back within target after experiencing very high inflation over the past years.”
A Chief Economist at Standard Bank, Goolam Ballim, says due to the anticipated slowdown in the CPI, along with other supporting factors, the Reserve Bank is likely to keep interest rates unchanged this week.
“We are going to focus on food and rental inflation to suggest whether this deceleration will be enduring and we do think it will be enduring. We think that the inflation number combined with the rand’s recent recovery following the material relapse with the Lady R matter will likely hold the Reserve Bank’s hand. In other words, we think that the Reserve Bank is unlikely to raise rates when it meets in incoming days.”
