Inflation Heats Up

Inflation, as measured by the annual change in the consumer price index (CPI), accelerated less than expected to 4.5% in April from 3.8% in March.

Economists had expected inflation to heat up as the various tax and levy increases introduced in the 2018 budget took effect on April 1.

This took the index, which was set to 100 in December 2016, to 107 points in April from 106.2 in March and 102.4 in April 2017.

At 4.5%, April’s inflation came in lower than the economist’s consensus of 4.7%. It places inflation exactly in the middle of the Reserve Bank’s 3%-6% target range, strengthening the case for the central bank to hold interest rates steady.

On Thursday at 3pm, Reserve Bank governor Lesetja Kganyago is expected to announce that the monetary policy committee has decided to keep the Bank’s repo rate steady at 6.5%.

By convention, South African banks add 3.5 percentage points to the repo rate to set their prime rate. If the repo rate does not change, the commercial bank’s prime rate will remain level at 10%.

The 72c/litre increase in the price of petrol in April contributed to the fuel component of CPI showing 9% annual inflation.

This matched a 9% inflation in meat prices.

Overall food inflation was 3.7%, with fruit prices falling 8.2%, and bread and cereal prices falling 3.7% over the year.

Source : https://www.businesslive.co.za/bd/economy/2018-05-23-inflation-accelerates-but-less-than-expected/

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