SA June CPI slows to 4.9% y/y

South Africa's annual Consumer Price Inflation slowed to 4.9 per cent in June, from 5.2 per cent in May, according to the latest statistics released early this morning. The Chief Economist of Efficient Group, Dawie Roodt, joined CNBC Africa to provide analysis on this development. Roodt highlighted that the figures were largely in line with market expectations, with a slight deviation from the projected 4.8%. He attributed the slowdown to factors such as stable core inflation at 3.2%, driven by consistent food price increases and notable spikes in petrol prices. Particularly, meat prices and certain fruit categories experienced significant growth, contributing to the overall inflation rate. Despite the moderation from the previous month, the cost of living remains elevated, with prices still 4.9% higher compared to the previous year. An interesting aspect Roodt mentioned was the stagnation in rental prices, likely influenced by recent events in the property market and the impact of the current lockdown restrictions. While there may be short-term disruptions in supply chains due to recent riots, Roodt expressed a moderate level of concern, expecting prices to stabilize relatively quickly. However, he warned of potential long-term implications on inflation, especially if fuel prices continue to rise due to currency fluctuations. The recent agreements in the oil market to increase production could provide temporary relief in oil prices, but Roodt emphasized that the weaker currency might overshadow these benefits in the long run. When asked about the upcoming interest rate decision by the Reserve Bank, Roodt speculated that the current economic challenges, including weakened growth prospects and recent unrest, might prompt the bank to maintain its monetary policy stance. Given the subdued inflation outlook and the need to support economic recovery, Roodt believed that the Reserve Bank is unlikely to implement interest rate hikes in the near future. Overall, the combination of softer inflation, anticipated lower economic growth, and the uncertain environment in South Africa suggests a cautious approach from the Reserve Bank, with the possibility of only minimal adjustments by the end of the year. Roodt concluded that the current dynamics do not warrant immediate tightening of monetary policy, emphasizing the importance of stability amidst ongoing economic uncertainties.