Rate cut on the cards as May inflation slows

Headline inflation was at 5.7% year on year in May from 6.1% in April, compared to economists’ expectations of 5.95%, data showed on Wednesday.
 
Food inflation dropped sharply to 6.6% on an annual basis and was at -0.2% month-on-month from flat in April. Transport costs also declined.
 
“It confirms to us that inflation in South Africa is not a real problem any more despite the rand exchange rate’s recent depreciation. I think we will see a benign inflation environment,” said Elize Kruger, an economist at Kadd Capital.
 
Earlier this month Reserve Bank governor Gill Marcus sounded concern about the upside risk that a depreciated exchange rate had on her inflation outlook.
 
The rand plunged to a three-year low of 8.71 against the dollar on June 1 as the festering eurozone debt crisis hit emerging markets.
 
<strong>Month-on-month inflation</strong>
It had recovered to 8.20/dollar by Wednesday, mainly as investors expect the US Federal Reserve to announce some form of monetary easing that would result in increased foreign flows to emerging markets.
 
On a month-on-month basis inflation also surprised to the downside, easing to 0.1% compared to 0.4% in April. Economists had expected month-on-month prices would remain unchanged.
 
Economists are now starting to talk about the central bank in Africa’s biggest economy contemplating an interest rate cut &ndash; although not as soon as next month’s monetary policy decision.
 
Analysts say the global growth outlook may need to deteriorate further to trigger a reduction in the benchmark lending rate.
 
“We continue to believe that the Reserve Bank will leave interest rates unchanged this year,” said Annabel Bishop, an economist at Investec.
 
“But should the global outlook deteriorate significantly, the Bank is likely to cut by 50 basis points in Q3 [quarter three] 2012.” &ndash; Reuters
Reuters
Guest Author
Advertisting

We must take stock of our schools’ sins

Ignore the language used in brochures and on open days and be vigilant about the details

Study unpacks the ‘hidden racism’ at Stellenbosch

Students say they feel unseen and unheard at the university because of their skin colour

‘Judge President Hlophe tried to influence allocation of judges to...

Deputy Judge President Patricia Goliath accuses Hlophe of attempting to influence her to allocate the case to judges he perceived as ‘favourably disposed’ to former president Jacob Zuma

SAA grounds flights due to low demand

SAA is working to accommodate customers on its sister airlines after it cancelled flights due to low demand
Advertising

Press Releases

MTN unveils TikTok bundles

Customised MTN TikTok data bundles are available to all prepaid customers on *136*2#.

Marketers need to reinvent themselves

Marketing is an exciting discipline, offering the perfect fit for individuals who are equally interested in business, human dynamics and strategic thinking. But the...

Upskill yourself to land your dream job in 2020

If you received admission to an IIE Higher Certificate qualification, once you have graduated, you can articulate to an IIE Diploma and then IIE Bachelor's degree at IIE Rosebank College.

South Africans unsure of what to expect in 2020

Almost half (49%) of South Africans, 15 years and older, agree or strongly agree that they view 2020 with optimism.

KZN teacher educators jet off to Columbia University

A group of academics were selected as participants of the programme focused on PhD completion, mobility, supervision capacity development and the generation of high-impact research.

New-style star accretion bursts dazzle astronomers

Associate Professor James O Chibueze and Dr SP van den Heever are part of an international team of astronomers studying the G358-MM1 high-mass protostar.

2020 risk outlook: Use GRC to build resilience

GRC activities can be used profitably to develop an integrated risk picture and response, says ContinuitySA.

MTN voted best mobile network

An independent report found MTN to be the best mobile network in SA in the fourth quarter of 2019.