South Africa’s producer-price inflation (PPI) slowed to 9,5% year-on-year last month from 9,8% in January, data showed on Thursday, boosting expectations that interest rates should stay unchanged.
Statistics South Africa said factory-gate prices decreased by 0,1% on a monthly basis in February, after a 0,4% expansion in January.
Economists polled by Reuters had forecast that annual PPI would come in at 9,9%, while the monthly rate of increase was seen at 0,3%.
”It [data] was lower than expected, especially the imported commodities … mostly due to the rand, probably. What it means for interest rates is that it is very difficult for [the Reserve Bank] to lift them so we expect to keep them unchanged,” said Fanie Joubert, economist at Efficient Group.
”However there are definitely some underlining inflationary pressures from transport and food prices. So while you have some better-than-expected inflation figures now … in the next few months that is going to be different.”
Although most economists see pressure in coming months from rising food and fuel prices, the lower-than-expected producer-inflation prices — coupled with a brake in consumer inflation — increases the chances of the central bank keeping a lid on interest rates when it next meets in April.
The Reserve Bank raised its key repo rate by a cumulative two percentage points to 9% last year, citing a need to curb rampant consumer spending, which was seen as adding to a gaping current-account deficit that has weighed on the rand.
Reserve Bank Governor Tito Mboweni suggested earlier this week interest rates were not the only tool the central bank may use to curb lending, repeating that increasing commercial bank’s reserve requirement was another option. — Reuters