Consumer inflation is expected to have lifted slightly in May but weak economic activity might see the South African Reserve Bank (SARB) refrain from hiking the repo rate at the July meeting of the Monetary Policy Committee (MPC)‚ says Investec economist Kamilla Kaplan. CPI data for May is scheduled to be released by Stats SA on Wednesday‚ preceded the following day by the release of the SARB’s economic leading indicator for April. “CPI inflation is forecast to have lifted to 6.3% year on year (y/y) in May from 6.2% y/y in April. Food and fuel price dynamics are likely to have remained key influencing factors‚” said KaplanShe pointed out that in May‚ the petrol price increased by 12c/litre while double digit food price growth was expected to have persisted on the lingering drought effects.CPI inflation had also been buoyed by the lagged effects of cumulative currency depreciation.“The drivers of CP inflation continue to be of a supply side nature‚ whilst meaningful demand led inflation has remained absent. The muted demand environment‚ as evidenced in the contraction in household consumption expenditure in the first quarter of 2016‚ coupled with the relatively moderate rates of credit and money supply growth‚ suggests that the current supply side price pressures should not lead to pervasively higher rates of inflation‚” Kaplan said.“Given the extent of weakness in economic activity‚ and the focus of the ratings agencies on GDP growth prospects‚ it is probable the SARB may soften its policy stance and refrain from hiking interest rates at its July MPC meeting.“Nevertheless‚ there remains the risk of one more interest rate hike later this year‚ in view of the SARB’s forecast protracted breach of the target band and concerns regarding elevated inflation expectations‚” Kaplan added...