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Consumer inflation slows to within the Reserve Bank’s target

| Economic factors

Consumer inflation slowed in July, with the consumer price index (CPI) rising 6% year on year, from 6.3% in May.

That was a little better than expected and brings consumer inflation just within the Reserve Bank’s 3%-6% target.

A median consensus forecast from 12 economists was for inflation to have slowed slightly to 6.1% in July.

Month on month, though, CPI inflation accelerated to 0.8% in July, compared with a 0.6% increase in CPI in June from May, Statistics SA data showed on Wednesday.

Consumer inflation data are keenly watched for clues about the direction of the Reserve Bank’s monetary policy. The Bank next meets in September. An improving inflation outlook, supported by a firmer rand and pedestrian growth, strengthen the case for interest rates to remain unchanged.

Until recently, the prospect of global interest rates remaining low was another factor helping the Bank to stay its hand, but comments from US Federal Reserve officials have been increasingly hawkish.

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