South African inflation slowed for any third consecutive month in May?as food-price growth decelerated, giving the Reserve Bank room to have mortgage rates unchanged to back up an economy vulnerable to falling into recession.
The inflation rate fell in order to six.1% from 6.2% per month earlier, Pretoria-based Statistics Nigeria said on its website on Wednesday. The median of 21 economist estimates created by Bloomberg was 6.4%. Prices rose 0.2% while in the month.?Bond yields and forward-rate agreements, familiar with speculate on borrowing costs, declined.
The Reserve Bank’s Monetary Policy Committee left the benchmark repurchase rate unchanged at 7% after raising it four times since July as it sought just to walk inflation directly into its 3% to 6% target, even while it forecast the economy will expand on the slowest pace since a 2009 recession in 2010. Gdp contracted 1.2% during the 90 days through March.
Following the contraction throughout the economy inside the first quarter “market expectations additional Sarb?tightening are scale back,” Razia Khan, head of Africa macro research at Standard Chartered in the uk, said within a e-mailed note to clients. “Going forward, expectations of los angeles Nina driving higher-than-average rainfall by the end of 4 seasons should profit the food-price outlook. “
While the rand’s 22% fall from the dollar since introduction of the a year ago has increased pressure on consumer prices?and compounded the result within the worst drought in additional compared to a century, food inflation slowed to 10.8 %in May from 11.3% in April, in accordance with the statistics office.
The central bank will announce its interest rate decision on July 21 and has said inflation is only going to get back to its target band in the third quarter of the coming year. The five-year breakeven rate, a step of bond investors’ price expectations, has fallen 45 basis points this month to.89%, the minimum since December.
“The the important point for your Reserve Bank is that CPI still remains away from upper 6% inflation-target band,” Jeffrey Schultz, an economist at BNP Paribas Securities, said on the phone from Johannesburg. “While this certainly does impart them with some a little space, I feel the scope for upside CPI surprises while in the other half of year is quite definitely there.”
Core inflation, which excludes food, non-alcoholic beverages, gasoline and expenses, was 5.5% in May, the same as the previous month.
The rand was little changed at 14.7070 per dollar since 11am in Johannesburg on Wednesday. Yields on rand-denominated government bonds due December 2026 fell six basis points to 8.92%.
? 2016 Bloomberg
