Latest inflation data supports call for repo rate cut - Standard Bank
Standard Bank has described the consumer inflation data for June as encouraging.
Stats SA on Wednesday announced that annual consumer price inflation eased to 5.1% in June, from the 5.2% recorded in May.
The bank’s Dr Elna Moolman said they believe the easing of headline inflation and the latest rental and transportation inflation is a positive development.
Moolman said rental inflation is important as it plays a big role in the inflation basket.
Actual rentals increased by 0.8% in the second quarter of 2024 compared with the first quarter.
"This data is therefore proving support for our longstanding view that the Reserve Bank will likely start to ease monetary policy reasonably soon. This should provide relief to the economy rather than significant stimulus as we still don't expect a deep cycle.
"We only expect a 1% point of interest rate cuts spread over four meetings, in other words, a quarter percentage at a time".
Meanwhile, FNB's senior economist Koketso Mano predicated that that headline inflation should continue its relative stability in July.
"This is despite monthly pressures lifting strongly on utility cost increases and intensifying food price pressures. Nevertheless, fuel deflation, following the R1 per litre reduction in petrol prices, should once again mitigate these pressures,” Mano said.
“Headline inflation forecasts for 2024 and 2025 are being scaled down, as seen in the latest SARB forecast, as well, reflecting slowing global inflation, stable oil prices, a less depreciated rand, and subdued domestic demand.
"However, upside risks are material as heightened geopolitical tensions affect logistics and the trade of goods. Furthermore, adverse weather conditions should support the premium on soft commodity prices. Therefore, while the IMF predicts that global inflation will slow to 4.4% in 2025, from 5.9% this year, the emphasis is that the road ahead should be bumpy.”
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