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SOUTH AFRICA: HSBC Lower CPI Forecasts Following This Morning’s Data

SOUTH AFRICA
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  • With today's slight downside surprise and near-term disinflationary pressure from local fuel prices amid a lower oil price and a stronger ZAR, HSBC cut their inflation forecasts. They expect headline inflation to average 4.5% in 2024 (4.7% previously) with a trough of 3.1% y/y in October before averaging 4.4% in 2025 (from 4.6%). They note that lower fuel prices are the key downside pressure to their inflation outlook, while electricity tariffs present the main upside risk.
  • In HSBC’s view, the combination of recent disinflation and last week's data, which showed lower inflation expectations, supports a 25bp SARB rate cut at tomorrow's MPC meeting. They forecast 75bps of rate cuts in total, with the latest CPI data suggesting a risk that the SARB eases policy faster and slightly deeper than they currently estimate.
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  • With today's slight downside surprise and near-term disinflationary pressure from local fuel prices amid a lower oil price and a stronger ZAR, HSBC cut their inflation forecasts. They expect headline inflation to average 4.5% in 2024 (4.7% previously) with a trough of 3.1% y/y in October before averaging 4.4% in 2025 (from 4.6%). They note that lower fuel prices are the key downside pressure to their inflation outlook, while electricity tariffs present the main upside risk.
  • In HSBC’s view, the combination of recent disinflation and last week's data, which showed lower inflation expectations, supports a 25bp SARB rate cut at tomorrow's MPC meeting. They forecast 75bps of rate cuts in total, with the latest CPI data suggesting a risk that the SARB eases policy faster and slightly deeper than they currently estimate.