South Africa’s CPIX inflation rate, targeted by the central bank, rose more slowly than expected at 4,9% in the year to February, increasing the chances that interest rates will stay on hold for now.
The CPIX rate slowed from 5,3% in January, and figures from Statistics South Africa on Wednesday also showed the all-items consumer price index (CPI) rose by a slower annual rate of 5,7% in February compared to January’s 6.0 percent.
On a monthly basis, CPIX contracted by 0,1%, while headline CPI also shrank by 0,1%.
A Reuters poll had predicted CPIX would rise by 5,2% year-on-year and 0,1% month-on-month, while CPI inflation was seen at 6% year-on-year and 0,1% month-on-month.
“It’s better than expected for sure. It must take some pressure off the Reserve Bank to hike interest rates when it meets next month. The scenario we should probably be looking at is rates moving sideways for now,” said Brait economist Colen Garrow.
“Looking ahead we’re probably looking at a sharp rise in food and fuel prices come the March (inflation) figures, which will only be released in April,” he said.
The rand was firmer at 7,2675 against the dollar from 7,2990 just before the data came out, while yields on the benchmark R157 government bond were at 7,775 percent from 7,82%.
On Tuesday central bank governor Tito Mboweni said South Africa’s solid economic growth, driven by rampant consumer spending, could add to inflationary pressures if it was not matched by structural adjustment.
Mboweni reiterated the Reserve Bank could raise commercial banks’ reserve requirements to cut credit growth, suggesting it may look to other ways, rather than interest rate hikes, to tame demand.
The central bank kept its key repo rate steady at 9% at its monetary policy committee meeting in February, after 200 basis points’ worth of hikes last year, citing an improved inflation outlook. – Reuters
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