CPI inflation for March has come in lower than expected.
Image: Ayanda Ndamane / Independent Newspapers.
Annual consumer price inflation dropped more than expected to 2.7% in March, down from 3.2% the previous month – which is good news for a potential interest rate cut.
Yet, the South African Reserve Bank is likely to take a cautious stance during its next meeting given geopolitical issues such as US President Donald Trump’s trade war.
On a month-on-month basis, inflation gained 0.4%, Statistics South Africa said on Wednesday morning.
The agency noted that the main positive contributors to the decline in the rate of growth in the cost of living was housing and utilities, food and non-alcoholic beverages, as well as restaurants and accommodation services.
Statistics South Africa’s data shows a steady decline in the year-on-year inflation rate, with it having dropped from 6.9% in 2022 to 4.4% overall last year.
For the February print, Statistics South Africa said inflation was unchanged from January. Yet, it said that this was the “fourth consecutive month that inflation has remained above the four-and-a-half-year low of 2.8% in October”.
Inflation in February was driven by basic food items such as maize meal, which almost hit two-year highs.
For the February print, Statistics South Africa noted that maize meal inflation hit a 17-month high, with samp gaining to a 19-month high last month as the annual rate for food and non-alcoholic beverages hit a four-month peak in February.
Neither maize nor samp attract VAT, with the potential hike in VAT set to impact inflation over the next two years.
South African Reserve Bank (SARB) governor, Lesetja Kganyago, aims to have the inflation target changed from the 3%-6% range to the medium point of 4.5%. However, this cannot happen without official policy changes.
National Treasury has noted that inflation targeting has been beneficial for the economy, especially the poor. It added that the government continued to support “effective inflation targeting”.
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