Inflation continued to hover close to multiyear lows, despite edging higher in June, data from Stats SA showed on Wednesday.
The increase took annual consumer inflation to 2.2% in June, up from its near 16-year low of 2.1% in May, and the second consecutive month that it has come in below the lower bound of the SA Reserve Bank’s target range of between 3% and 6%.
The monthly increase in inflation was 0.5% in June — a reversal of the -0.6% recorded between April and May, according to Stats SA, with fuel prices still a dominant feature in the changes recorded.
Stats SA said that although fuel prices increased 7.5% from May to June, fuel was still on average 20.9% cheaper than it was a year ago.
Last week, following the meeting of its monetary policy committee (MPC) the Bank cut interest rates for a fifth consecutive time in 2020 to record lows of 3.5% as the economy continues to grapple with the ramifications of the Covid-19 pandemic and the lockdown.
The Bank revised its growth forecasts for the year, expecting a contraction of 7.3%, compared to its May forecast of a decline of 7.0%, while leaving its forecast for consumer price inflation unchanged at an average of 3.4% in 2020. It marginally lowered its forecast for the outer years, revising those down to 4.3% in 2021 and 2022.
The Bank’s decision to cut was not unanimous, however, with two members voting to hold, while governor Lesetja Kganyago stressed that future decisions from the MPC would be highly data-dependent.
He also indicated that the Bank had been aggressive in “front-loading” interest rate cuts but that the economic lockdown had made it difficult to understand the effect of the monetary policy accommodation thus far.
The lockdown has severely affected Stats SA’s ability to collect information on prices, requiring it to use special methods to impute or calculate prices for certain goods and services. June saw SA move from level 4 lockdown restrictions to level 3, and the extent of imputation in this release is lower than that for April and May, Stats SA said.