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Annual consumer price inflation slowed for the first time this year, dropping to 5.3% in March, down from 5.6% in February and below some economists' estimates.
The decline was driven food and non-alcoholic beverages prices decelerating to 5.1% in March from 6.1% in February, far from its peak of 14% in March last year, according to Statistics SA. For this category of goods it was also the lowest annual increase since September 2020 when the rate was 3.8%.
Inflation for bread and cereals slowed to 5.0% from 6.1% the month before. It had previously hit a dizzying high of 21.8% in January 2023, Statistics SA pointed out. Bread flour, pasta, rusks, maize meal, ready-mix flour and white bread were all cheaper than a year ago.
"Meat inflation also cooled in March on the back of lower beef and mutton prices. The annual rate for meat in March was 0.8%, significantly lower than the recent peak of 11.4% in February 2023," the agency said in its statement.
The consumer price index (CPI) increased 0.8% month-on-month.
Education fees are surveyed once a year in March. Education was 6.3% more expensive in 2024 than a year ago - the highest increase since 2020, when the rate was 6,4%.
Despite the lower year-on-year inflation figure, the number remains above the 4.5% midpoint of the South African Reserve Bank's (SARB) target. The central bank has been clear that it won't cut interest rates until inflation is consistently closer to the middle of its 3% to 6% range.
READ | In the interest of the poor: SARB defends its inflation stance as the picture gets uglier
Nonetheless, FNB said that signs of consumer distress provided a compelling rationale for the Monetary Policy Committee (MPC) to ease rates sooner, a move that it said would uphold stability and bolster cyclical growth.
"While inflation may have reached its peak, the ongoing disinflation trajectory remains precarious, underscoring material upside risks and necessitating the MPC to exercise extreme caution in avoiding premature interest rate cuts," FNB said. "However, prolonging rate cuts beyond necessity, particularly when broader financial conditions are already restrictive, could further stifle growth and heighten the likelihood of a technical recession."
Late last year SA narrowly escaped a technical recession, which is defined as two consecutive quarters of a contraction in gross domestic product (GDP). Fourth quarter GDP was just 0.1% and economic growth for 2023 was recorded at 0.6%.
Many economists expect rate cuts may only start in September or November and have said that petrol price increases amid an escalation of conflict in the Middle East mean that upside risks to the inflation outlook remain.
READ | Fuel price volatility will likely delay rate cuts to late 2024, economists warn
The next MPC announcement is scheduled for 30 May.
