Fixed Income Trading at Prescient Securities believes that America’s Consumer Price Index (CPI) release last week of 4.2% year on year is good news for South Africa’s inflation outlook.
South Africa's inflation and bond market outlook received a boost after the latest United States inflation data showed underlying price pressures easing more than expected, although economists warn that risks linked to oil prices, the rand and global uncertainty remain.
According to Prescient Securities, the US Consumer Price Index (CPI) data for May provided some relief for global financial markets and emerging economies, including South Africa, by reducing fears of a more aggressive interest rate response from the US Federal Reserve.
Kristof Kruger, head of fixed income trading at Prescient Securities, said the headline inflation figure came in broadly in line with expectations, while the more closely watched core inflation reading was softer than anticipated.
“That distinction matters for global rates, emerging-market currencies, and South African bonds. Headline CPI printed at 4.2% year on year, in line with consensus, while headline CPI month on month printed at 0.5%, also in line. Core CPI was the more important number for markets. Core CPI printed at 2.9% year on year, in line with expectations, but the monthly core print came in at 0.2%, below the 0.3% estimate,” he said.
