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Inflation continues to moderate

Economy

Johannesburg - Consumer price inflation was dropped to 6.1 percent in March, down from 6.3 percent in February.

This is according to official statistics from Stats SA provided on Wednesday.

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A shopper carries a basket in a supermarket.

The agency says the consumer price index increased by 0.6 percent month-on-month in March 2017.

Analysts have been concerned that recent political moves, which saw President Jacob Zuma fire former finance minister Pravin Gordhan ina Cabinet shuffle and replace him with Malusi Gigaba, would hurt the rand, leading to higher inflation and potential interest rate hikes.

The South African Reserve Bank has kept the prime lending rate stable at 10.25 percent over the past few meetings, even though inflation has stubbornly remains outside the 3-6 percent target range.

Paul Sirani, chief market analyst at Xtrade, notes the fall in inflation is likely to spur the rand to a strong session.

The currency lost 10 percent against the dollar after Gordhan was recalled on March 27, shortly before being axed. It has, however, recovered off those lows.

“Having dipped down to a worrying 18-month low amidst political uncertainty last week, the rand has come back fighting and this morning’s reported fall in inflation is likely to spur on another strong session,” says Sirani.

Read also: How South Africans are dealing with inflation

However, Sirani says the Reserve Bank is unlikely to move on until inflation comes down further and, importantly, remains down.

“Today’s figure shows that prices are heading in the right direction, though policy makers are likely to sit on their hands and seek further reassurance from next month’s figures.

Inflation was 6.6 percent in January, down from 6.8 percent in December.’

“A poor stretch for the rand during the early part of March, fuelled by the [removal] of Gordhan, will have heightened import costs and that’s likely to feed into next month’s CPI reading,” Sirani notes.

BUSINESS REPORT ONLINE

 

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