Adenaan Hardien, chief economist at Cadiz African Harvest Asset Management, says that Consumer inflation continued its unrelenting upward trajectory in January. This was in contrast to expectations of a slight moderation. CPIX inflation rose to 8.8% from 8.6% in December.
A number of factors drove the higher than expected reading, including big increases in food and medical care costs, pressure from municipal rates, and changes to the survey methodology of clothing and footwear.
Hardien says that at the time of the last MPC meeting, their expectation was that CPIX inflation will peak in February. Recent developments with respect to oil prices and the rand have led us to expect the peak in March. Last week’s figures push up the expected peak, he says.
“The key question we need to confront is, whether the extent of the deterioration in near-term inflation prospects is sufficient to push the Reserve Bank into hiking again. I would argue that we are not there yet, but the call is made with less conviction than a month ago.”