Inflation likely to soften

By admin
22 October 2014

Inflation was likely to soften further as global food and oil prices had declined "significantly", Nedbank's economic unit said on Wednesday.

"Annual consumer inflation surprised to the downside in September... This was lower than our and the market's expectation of 6,1 per cent," it said in a statement.

"Looking ahead, inflation will likely soften further as global food prices have declined significantly and global oil prices have dropped below [US]90 a barrel."

Earlier on Wednesday, Statistics SA said CPI dropped to 5,9 per cent in September from 6,4 per cent in August.

"This is the first month since February that it is below the ceiling of the Reserve Bank's target," Stats SA said.

"The 0,5 percent drop in the rate was largely because of a 67c/l drop in the petrol price. This is equivalent to a decrease of almost five percent."

The inland price of 93 unleaded petrol was now only 14c more than it was in September 2013.

Food prices were unchanged on average in September, compared to August, bringing the annual rate down to 8.5 percent compared to 9.4 percent for August.

The price of maize meal declined by 1,3 per cent over the course of the month. It has increased by only three percent since September last year.

Nedbank's economic unit said there was a possibility that inflation would remain below six percent for a few months before the impact of the weaker rand started coming through in the numbers.

"We had initially pencilled in a 0,25 percentage point rate hike in November, but today's consumer inflation figures decrease the probability," the group said.

"However, much still depends on the trajectory of the currency, which remains extremely vulnerable given the country's large twin deficits and the anticipated changes in global monetary policies."

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