The Inflation Outlook Glass is Indeed Half Empty

SOUTH AFRICA - Report 26 Mar 2015 by Iraj Abedian
Today, the South African Reserve Bank (SARB)’s Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 5.75% per annum, citing deteriorated inflationary prospects. Granted, the headline inflation rate has moderated significantly over the past months, from 5.9% year-on-year (y/y) in October 2014 to 3.9% in February 2015. Likewise, the rate of increase in the producer price for finished manufactured goods decelerated from 6.7 to 3.5% y/y over the same period (see Graph 1). Soft commodity prices – in particular oil – have exerted disinflationary pressures on the South Africa...

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