Year-on-year consumer price inflation excluding mortgage rates (CPIX) continued its decline last month, subsiding to 11,8% from 12,4% in December.
Releasing the figures on Tuesday, Statistics SA said the key drivers of the latest figure included the cost of food, housing, transport, and medical care and health expenses.
The CPIX for metropolitan and other urban areas is used by the SA Reserve Bank to determine its inflation target, set at between three and six percent for the next two years.
Last month’s decline was the second in a row since the CPIX peaked at 12,7% in November last year.
Economists said the latest figures were slightly higher than predicted, but were broadly in line with market expectations. An interest rate cut earlier than June this year remained unlikely, they said.
”There is no shock in these numbers. We still see interest rates moderating in the coming months, with the first cut likely in June,” said Standard Bank economist Monica Ambrosi.
Old Mutual Asset Managers senior economist Johann Els agreed, saying inflation should continue its downward trend for the rest of the year.
”We still believe that the Reserve Bank will wait at least until June before cutting interest rates.”
There were still risks in terms of the cost of food, international oil prices. Wage increases could be another significant factor, Els said.
Absa economist John Loos said the latest CPIX was disappointing in view of market expectations of a figure of 11,6%.
”This is a setback for hopes of a March interest rate cut,” Loos said.
Statistics SA said headline inflation, or the consumer price index for metropolitan areas (CPI), stood at 13,7% last month, down from 14,4 % in December.
The main contributors were annual increases in housing, food, transport, medical care and health expenses, and personal care.
The annual rate of food price rises slowed down to 15,5% last month from 16,1% in December.
This resulted mainly from increases in the cost of meat, grain products, milk, cheese, eggs and vegetables.
Ambrosi said food prices would hopefully abate in the coming months in view of the strong performance of the rand against other currencies.
Loos predicted CPIX inflation would sink to six percent in the last quarter of the year, bringing the average rate for the whole of the year to 7,8%.
”The average rate for 2004 is expected to fall within the target range … averaging at 5,1%,” Loos said. – Sapa