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CAPE TOWN – Consumer Price Inflation (CPI) went against market expectations to remain steady at 4.5 percent year on year and moderated to 4.4 percent year on year in April.

Economists and market watchers cited various reasons for the moderation.

Investec economist Kamila Kaplan said in April, the effect of higher energy price inflation, reflecting respectively the 131c per litre and 82c per litre petrol and diesel price hikes, was partially countered by low food price growth and muted underlying inflation.

Kaplan projected CPI to average and anualised 4.8 percent in 2019, but was set to rise back towards the upper end of the target range in 2020 on low base factors and high administered price increases (especially electricity). “As such, the repo rate is likely to remain on hold at 6.75 percent at this week’s MPC meeting to account for the higher projected inflation over the forecast horizon.”

FNB economist Matlhodi Matsei concured that the moderation was lower than the market’s expected outcome of 4.5 percent, as well as their expectation of a 4.6 percent print.

“As was widely expected, upward pressure to headline inflation came from transport CPI, which accelerated to 7.4 percent year on year from 6.4 percent in March and added 1.1 percentage points. The R1.31/l increase in the domestic petrol price in April was the key driver for this acceleration,” said Matsei.

Portfolio Manager at PPS Investments, Luigi Marinus, said the year-on-year decline in alcoholic beverages and tobacco as well as recreation and culture were slightly offset by a year-on-year increase in transport.

“Month-on-month inflation has increased steadily over the past three months, with two 0.8 percent increases in February and March respectively followed by a 0.6 percent increase in April,” he said. 

Marinus said transport had contributed 0.4 percent to the month-on-month increase, with the residual adding the further 0.2 percent.

BUSINESS REPORT ONLINE