Inflation slows to 6.3% as fuel price falls
South African inflation slowed for the first time in seven months to 6.3% in March as fuel prices fell.
The inflation rate declined from 7% a month earlier, Pretoria-based Statistics South Africa said on its website on Wednesday. The median of 22 economist estimates compiled by Bloomberg was 6.4%. Prices rose 0.8% in the month.
The worst drought in more than a century is driving up food costs, adding to pressure on consumer prices caused by the rand’s 25% fall against the dollar in 2015.
The Reserve Bank’s Monetary Policy Committee increased its benchmark repurchase rate four times since July to 7% and has said inflation will only return to its 3% to 6% target range in the final quarter of next year.
Given the Reserve Bank’s inflation forecast and “hawkish policy bent, the repo rate is likely to rise further this year in order to maintain real interest rates in positive territory,” Kamilla Kaplan, an economist at Investec Ltd in Johannesburg, said in an e-mailed note to clients before the data was released.
A persistent breach of the Reserve Bank’s inflation target will require a policy response to achieve slower price growth, deputy governor Daniel Mminele said on April 16. The central bank has cut its economic growth forecast for South Africa to 0.8%, the slowest rate since the 2009 recession.
The yield on the benchmark 10-year bond dropped five basis points to 8.86% at 10.20am in Johannesburg.
Core inflation, which excludes food, non-alcoholic beverages, gasoline and electricity costs, slowed to 5.4% in March, the lowest rate since December, from 5.7%. – Bloomberg