The South African Reserve Bank is unlikely to cut interest rates next month, because of inflationary pressures that lie ahead
Consumer inflation dropped to 2.7% year-on-year in March, from 3.2% in February, with decreases registered in the cost of housing and utilities, as well as food and alcoholic beverages.
On a monthly basis, consumer prices increased by 0.4% in March, according to data published by Statistics South Africa on Wednesday.
The annual inflation rate for goods eased to 2% in March from 2.5% and that for services decelerated to 3.5% from 3.8%.
Inflation for housing and utilities was at 4.4%, while food and non-alcoholic beverages came in at 2.7% and restaurants and accommodation services were at 4.2%.
“Inflation pressure generally remains quite benign, and this vindicates the Reserve Bank’s decision to cut interest rates since late last year,” said Elna Moolman, head of South Africa Macroeconomic Research at Standard Bank.
“This doesn’t, however, necessarily remove all of the Reserve Bank’s potential concerns around medium-term upside pressure on inflation from the global tariff developments and a weaker currency. This doesn’t necessarily guarantee further interest rate cuts in the short term.”
The South African Reserve Bank held the interest rate at 7.5% in March, citing global uncertainties and upside risks to inflation.
Economists expect the central bank to keep rates unchanged again in May.