Inflation slows for third consecutive month - TechCentral

Inflation slows for third consecutive month

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South African inflation slowed for a third consecutive month in May, giving the Reserve Bank room to continue the pause in its interest-rate increase cycle.

The inflation rate fell to 6,1% from 6,2% a month earlier, Statistics South Africa said on its website on Wednesday. The median of 21 economist estimates compiled by Bloomberg was 6,4%. Prices rose by 0,2% in the month.

The rand’s 22% fall against the dollar since the start of last year has increased pressure on consumer prices, which compounded the effect of the worst drought in more than a century an drove up food costs.

The Reserve Bank’s monetary policy committee has raised it’s benchmark rate four times since July to 7% to steer inflation back into its 3% to 6% target even as its forecasts the economy will expand at the slowest pace since a 2009 recession this year.

The central bank will announce its interest rate decision on 21 July and has said inflation will only return to its target band in the third quarter of next year. The five-year breakeven rate, a measure of bond investors’ price expectations, has fallen 45 basis points this month to 6,89%, the lowest since December.

Core inflation, which excludes food, non-alcoholic beverages, gasoline and electricity costs, was 5,5% in May, the same as the previous month.

Forward-rate agreements starting in two months, used to speculate on borrowing costs, fell three basis points to 7,37% from minutes before the announcement.  — (c) 2016 Bloomberg LP

  • Written with assistance from Simbarashe Gumbo

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