Inflation driven by higher petrol prices

2016-11-03 06:01

Having taken a bullish view on South Africa’s inflation, MMI Holdings sees further downside risks to nominal growth.

In a statement on the economic outlook issued by MMI Holdings, economist Sanisha Packirisamy explained that Treasury anticipates an average headline inflation rate of 6.1% between 2016 and 2018. But this is 0.5% higher than MMI’s projected view of 5.6%.

“Given the downside risk, inflation between 2016 and 2018 will be around 5.6%,” she said. Subsequently, MMI expects relative currency strength to emerge in the next three years along with lower food inflation, particularly in 2017. Treasury, though, is of the view that inflation is set to remain outside government’s 3% to 6% target range at 6.4% for 2016.

This inflation is mainly driven by higher petrol and food prices. Over the medium term this may be about 6%, with upward pressure from electricity prices.

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