Tue Oct 25 10:42:40 SAST 2016


By Kea' Modimoeng | Aug 27, 2009 | COMMENTS [ 0 ]

FOOD prices are likely to come down in the next three months, before peaking again as a result of high commodity prices and the projected effects of a dry summer, economists said yesterday.

Speaking after the release of the consumer price index (CPI) figures for July, Mike Schussler said there was "often a delay in the relationship between increasing commodity prices and its impact on food inflation".

Stats SA said the CPI had slowed to a two-year low of 6,7percent year-on-year last month from 6,9percent in June.

Food inflation decreased by 0,4percent in July, but the annual rate decreased to 8,3percent in July from 10,2percent in June.

"We will see inflation going down a bit, but after three months the upward trend will begin," Schussler said.

André Jooste of the National Agricultural Marketing Council (NAMC) said: "One might have thought that the reduction in commodity prices last year would have resulted in decreasing inflation."

The latest inflation figures once again sparked speculation on whether the Reserve Bank would again cut interest rates at its next meeting next month.

Schussler said: "I doubt if we will have another rate cut this year as inflation remains sticky, and is likely to rise at the end of the year."

Investment Solutions economist Tebogo Dintwe believes that interest rates will be kept on hold for the remainder of the year.

She said "further deceleration is expected given that food inflation at the producer level is still moderating".

The Bank unexpectedly cut the repo rate by 50 basis points two weeks ago. - Additional reporting byReuters


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