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Consumer inflation nudges slightly higher, but less than forecast

by , 22 July 2015

Earlier today, Stats SA released its consumer inflation data for last month.

Whilst the key economic indicator came in marginally higher than May, it was much lower than economists expected.

Let's take a closer look at what the data revealed…

Consumer inflation hit 4.7% in June

Stats SA announced that the consumer price index came in at 4.7% for June, reports Fin24. This is 0.1% higher than the reported rate of consumer inflation in May.

The rate of inflation came in much less than forecasts suggested, notes BDLive. Estimates put inflation to rise to 5% for June.

Looking at the data on a month-on-month basis, inflation increased 0.4%, adds Fin24. That’s against a rise of 0.3% between April and May.

This marks the fourth consecutive month of inflation rising after falling for the six months before that, notes Fin24.

One of the main factors for inflation rising was the “47 cents per litre increase in the price of petrol” during the month, says the SABC. Another large hike this month is also likely to have an inflationary effect.

The impact of consumer inflation on the Reserve Bank’s decision over interest rates

No doubt the monetary policy committee, which will announce its interest rate decision tomorrow, will take this data into consideration, notes iAfrica.

It’s still uncertain what the Reserve Bank’s decision will be tomorrow regarding interest rates, notes MoneyWeb. There is divided opinion on whether the central bank will hike rates for the first time since last July in a bid to curb inflation.

Elize Kruger, an economist with KADD Capital, says with inflation coming out less than expected, this supports the “argument of no change in interest rates given the weak economic environment,” adds BDLive.

Over the longer term, chances are inflation will continue to rise. The Reserve Bank’s target band for inflation is between 3% and 6%.

Riyadh Bhyat of the Inflation Factory, says projections indicate there’s a high chance of consumer inflation “breaching the 6% ceiling” by the start of next year, says Fin24.

So good news that inflation didn’t rise as much as expected. We’ll find out tomorrow whether the Reserve Bank is willing to let inflation rise more before stepping in with an interest rate hike.

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Consumer inflation nudges slightly higher, but less than forecast
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