South Africa’s targeted CPIX (consumer inflation less mortgage costs) rate jumped to a new five-year high of 10,1% in March, beating forecasts and hardening expectations for another interest-rate increase.
Statistics South Africa said the targeted measure jumped from 9,4% in February to its highest level since December 2002, and climbed 1,6% month-on-month.
The all-items consumer price index (CPI) increased by an annual rate of 10,6%, compared with 9,8% previously.
Analysts said the strong numbers showed there was room for more rate hikes, adding to nine 50-basis points increases since June 2006, the latest of which was announced earlier this month.
”I think we’re quite surprised by how strong it’s actually come in,” Russell Lamberti, economist at market analysts ETM, said. ”I think if there was a case to be made for another interest-rate hike, this has done that job.”
Central bank Governor Tito Mboweni lifted the repo rate by half a percentage point to 11,5% on April 10 and warned the outlook for inflation had deteriorated.
CPIX broke through the top end of the bank’s 3% to 6% band in April last year and has since gathered pace, driven by sharply rising food and fuel costs.
Food inflation hit 15,3% year-on-year in March, while fuel pump prices leapt 8% last month.
Adenaan Hardien, economist at Cadiz African Harvest Asset Management, said: ”On the face of it this is not a good number, and confirms our view that there is certainly quite a high risk at this point for further tightening. Even though March is expected to be the peak, it confirms that for a while we will sit with inflation numbers well above the target range.”
Another economist, Mike Schussler from T-Sec, said: ”The nightmare continues. Inflationary pressures are growing. This is way above my expectation. It is not good news for the bond market, but it may help the rand with more people foreseeing another upward move in interest rates. It is a yield-driven market at the moment.
”Consumers are feeling battered and the new figures are not going to help interest rates. We are looking at at least another interest-rate hike. We have had more inflationary shocks than good news for the last year. It is knocking out the last remaining lights in our economy.” — Reuters, I-Net Bridge