JOHANNESBURG – Consumer inflation hit six percent in July, down from 6.3 in June, giving South Africans hope as they battle high prices.
But the rising price of food and beverages remains stubborn, accelerating to 11.3 percent year on year from 10.8 percent in June.
And it’s unlikely the Reserve Bank will drop the interest rate.
The central bank uses the Consumer Price Index to determine its interest rate decisions, with the target for inflation often between 3 and 6 percent.
Analysts say the latest figure does not point to a change in the interest rate.
CEO Lehumo Capital Maudi Lentsoane says: “In terms of the inflation number, it won’t impact the [Reserve Bank’s] Monetary Policy Committee just yet, but it is good news for the general public as we see moderation in the inflation number.”
Housing and utility prices were up by only 0.8 percent on a month-on-month basis in July.
But the increasing price of food and beverages remains stubborn, accelerating to 11.3 percent year on year from 10.8 percent in June.
“Food inflation has remained high and remember we are still recovering from the long drought … so the base effect of that we are still feeling. But even so, inflation may still go high because of food inflation but I don’t expect the SARB to cut rates, we are still in a hiking cycle,” says Lentsoane.
A firmer rand and lower than expected electricity costs have been cited as the reason for the first inflation number of 6 percent in 2016.
But the rand has now broken the R14 mark against the US dollar, and its volatility will also affect the direction of the inflation number