Three reasons SA inflation should come down from here

David Rees, Senior Emerging Markets Economist at Schroders

Here's why we think SA inflation should come down and monetary policy should start easing soon.

Inflation in South Africa has continued to surprise to the upside in the past couple of months. The South African Reserve Bank (SARB) unexpectedly hiked rates by 50bp to 7.75% at its last meeting in late-March, and the further increase in headline inflation is likely to concern policymakers.

However, there are three reasons to think that inflation should come down in the months ahead, and that the South African Reserve Bank (SARB) will eventually start to consider easing policy again.

First, fuel inflation has already begun to drop sharply and should fall a bit further before stabilising.

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