Inflation surpasses 6% target to 6,1%

In any event, we see the September print as relatively benign despite stubbornly high food inflation (11,6% y/y) which has been driven higher by bread and cereals (16,6% y/y) as well as fruit (25% y/y). Importantly, however, month-on-month food inflation moderated from 0,9% in August to 0,1% in September, with bread and cereals decelerating from @% m/m to 0,7%, and meat registering its second consecutive month-on-month contraction (-0,5%).

Year-on-year vehicle price inflation is closing in on double-digit growth, printing at 9,4% in September, and bodes ill for new vehicle sales for the rest of the year.

Petrol CPI contracted -3,4% y/y, but this is likely to return to positive territory given recent and pending fuel price increases. Actual rental and owner’s equivalent rent, both of which are surveyed in September, also drove inflation higher at 0,9% and 0,8% m/m respectively.

We remain of the view that inflation will nudge higher in the coming months, but should dip into the target range in 1Q17 as the higher base from earlier this year softens the number. To be sure, there are still many risks that could derail this outlook, among them a higher oil price (currently $52/bbl), any currency blowouts on domestic political noise, and insufficient rainfall that would jeopardise crop yields.