HIGH INFLATION SETS RATE CUT
INFLATION remained sticky last month but analysts believe the figure will support the case for another moderate interest rate cut by the Reserve Bank today.
Stats SA said yesterday the consumer price index, the Bank's targeted inflation measure, increased by 8percent year-on-year in May, slightly above expectations, from 8,4percent in April.
Inflation is back to where it was in January last year.
Economists forecast a 50 basis point cut in the repo rate, the rate at which the central bank lends to commercial banks, to 7percent - even though inflation has stayed above the 3 to 6percent target band for more than two years.
Today's cut would probably mark the end of the rate cutting cycle which started in December last year and has seen a cumulative 450 basis points shaved off the repo rate, economists said yesterday.
Mike Schussler, of Economists.co.za, said: "Inflation remains sticky and it is unlikely that it will go below 6percent in the next 12 months."
The key contributors to May's inflation figure were food and transport, said Standard Bank economist Danelee van Dyk.
Food inflation declined moderately from 13,6percent in April to 12,1percent in May.
Efficient group economist Dawie Roodt said we have reached a stage where "we can't use monetary policy anymore to stimulate the economy".
Both Schussler and Roodt said inflation would ease for now but higher oil prices would cause it to edge up again towards the end of the year. - Additional reporting by I-Net Bridge