24 Jul 2013
Flash: SARB to limit hawkish outcomes – TD Securities
FXstreet.com (Barcelona) - Marcin Budkiewicz, Strategist, Rates and FX Research at TD Securities notes that SA’s CPI continued to decline in June, reaching 5.5% down from 5.6% Y/Y in May, driven by lower services component.
Key Quotes:
“CPI continued to decline in June, reaching 5.5% down from 5.6% Y/Y in May, driven by lower services component. The print was significantly below our estimate of 5.9% and the consensus forecast of 5.8%, which were based on the expectation that a sharp rise in fuel prices would be the main driver”.
“Inflation is expected to accelerate in Q3, although from lower levels than previously expected. This reduces the risk that CPI will rise above the 6.3% average in Q3 expected by the SARB, and accordingly limits the probability of hawkish monetary policy outcomes”
“The SARB is becoming increasingly concerned about the diverging trend in economic growth and inflation, as the SARB’s forecasts for GDP growth were revised lower last week from 2.4% to 2.0% for 2013, and from 3.5% to 3.3% for 2014, while inflation forecasts were revised higher 0.1% higher vs. the prior forecast at 5.9% in 2013, and 0.3% higher at 5.5% in 2014. While they focus on both growth and inflation, they stress inflation more in accordance with their mandate”.
Key Quotes:
“CPI continued to decline in June, reaching 5.5% down from 5.6% Y/Y in May, driven by lower services component. The print was significantly below our estimate of 5.9% and the consensus forecast of 5.8%, which were based on the expectation that a sharp rise in fuel prices would be the main driver”.
“Inflation is expected to accelerate in Q3, although from lower levels than previously expected. This reduces the risk that CPI will rise above the 6.3% average in Q3 expected by the SARB, and accordingly limits the probability of hawkish monetary policy outcomes”
“The SARB is becoming increasingly concerned about the diverging trend in economic growth and inflation, as the SARB’s forecasts for GDP growth were revised lower last week from 2.4% to 2.0% for 2013, and from 3.5% to 3.3% for 2014, while inflation forecasts were revised higher 0.1% higher vs. the prior forecast at 5.9% in 2013, and 0.3% higher at 5.5% in 2014. While they focus on both growth and inflation, they stress inflation more in accordance with their mandate”.