Headline inflation shows welcome decline

Good economic news is that the consumer price index (CPI) (headline inflation) for July has again shown a welcome declining tendency, reaching 4,7% from 5,4% in June.

Prof Raymond Parsons, economist from the North-West University (NWU), says this is not only a two-year low for the CPI but is also much better than market expectations.

“Core inflation further moderated to a ten-month low of 4,7% from 5,0% in June. The omens for the inflation outlook in South Africa look promising.”

According to Prof Parsons, it is likely that the declining trend in the rate of inflation will continue for the rest of the year, with inflation remaining well within the South African Reserve Bank’s 3 to 6% inflation target range.

“While the falling rate of inflation is positive, upside risks to the inflation outlook still exist, including the vulnerable rand and administered prices such as Eskom tariffs.”

Prof Parsons says the better news on the inflation front is encouraging for consumer and business confidence. “There is a sufficiently persistent trend of improvement in the inflation outlook to justify the Monetary Policy Committee again leaving interest rates unchanged at its meeting next month.”

Submitted on Thu, 08/24/2023 - 09:44