The annual average consumer inflation rate is likely to be the lowest since 1969’s 2,9% according to initial forecasts.
This favourable inflation outlook is in part due the South African Reserve Bank (SARB) starting an interest rate cutting exercise that will reduce the repo rate, and most other interest rates, by some 500 basis points over the next few months.
Economists warn that any economic forecast carries a “health warning”, as the future is unknown. The way the health warning is dealt with is that the assumptions underlying the forecast are made explicit.
In the South African context, the explicit warning is that the rand does not weaken beyond R8,50/$ this year and R10/$ next year.
If in addition, the oil price remains below $30 per barrel, then the annual average consumer inflation rate should come in between 4% and 2%, depending on the pace and extent of interest rate cuts.
Last year the annual average consumer inflation rate was 9,2%, while the recent lowest annual average was 5,2% in 1999.
For most of the 1970s and 1980s, the annual average was in double digits. – I-Net Bridge