S.Africa's Inflation Outlook: Standard Chartered

Standard Chartered notes...

• Near-term, we expect inflation to decelerate, with headline inflation below 4% in March, largely as a result of weaker oil prices. 
  
  
• However, recent ZAR weakness, the recovery in the global oil price since its January lows, and an increase in fuel levies in the new fiscal year in April all point to upside inflation risks in the months ahead. 
  
  
• The SARB is likely to raise its headline inflation forecasts at its March MPC meeting. 
  
  
• The Treasury's forecasts, which take into account recent budget proposals to increase revenue, already suggest that inflation will trend higher in 2016 and 2017, falling just within the inflation target (5.9% in 2016 and 5.7% in 2017). 
  
  
• With the SARB's forecasts at the March MPC meeting likely to take into account recent ZAR weakness versus the USD as well, headline inflation projections may be revised sharply higher, despite weak growth.