Mboniso Sigonyela
Stubborn inflation figures continue to threaten the Reserve Bank’s inflation targeting measures, but the hard-pressed retail sector may breathe a sigh of relief after March’s broad-based price increases.
The uninspiring inflation release confirmed the market’s fears as the bank’s inflation targeting measure, consumer price inflation excluding interests on mortgages (CPIX), posted a 7,5% year-on-year rise. This is a slight, but insufficient improvement from the previous month’s 7,7%.
“It is almost as bad as the already negative market expectations of 7,4%. The problem seems to be the month-on-month increases that are at 0,8% while we need a stable 0,5% rise to achieve the below 6% rate by 2002,” says Absa financial economist Matthys Strauss. The monthly jump was 0,3% in February.
Matters could worsen as the most recent petrol price hike and continued rand weakness against rising oil prices are yet to filter through.
Market commentators agreed that the figures do not augur well for the much-needed interest rate relief for the economy and there is a remote possibility of an interest rate hike.
Headline inflation equalled the markets’ expectations of a 7,4% year-on-year and a better 0,7% month-on-month rise. But core inflation, which excludes volatile items and is regarded as a more accurate measure of inflationary pressures in the economy, followed the CPIX trend with a disappointing 8,5% year-on-year rise and a 0,9% month-on-month rise worse than the expected 0,8%. This was due to increases in education, food, tobacco and furniture prices.
ENDS