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HSBC Revise 2024 Headline CPI Forecast Lower, Expect SARB Cuts to Begin in September

SOUTH AFRICA
  • HSBC note that the December inflation print was in line with their estimate, with disinflation driven by a decline in local fuel prices and easing food price growth.
  • Prospects for further near-term inflation relief seem limited. While food inflation is likely to ease further, base effects will take fuel inflation higher in January and core price pressures are set to accelerate from February as a result of large increases in medical insurance premiums, HSBC write.
  • HSBC nudge their average headline CPI forecast 10bp lower to 5.3% y/y for this year on a slightly softer path for food prices but keep it unchanged at 5.1% in 2025, leaving their core inflation estimate unchanged at 4.8% y/y over the forecast horizon.
  • Amid a sticky inflation outlook, HSBC expect the SARB to keep its policy rate unchanged at 8.25% at tomorrow's MPC meeting with the statement likely to adopt a cautious tone. They specify that they anticipate a shallow rate cutting cycle to kick-off from September 2024.
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