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Consumer inflation edges up

May 17 2011 10:36 Reuters & Sapa

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Johannesburg - South Africa's consumer inflation edged up slightly to 4.2% year-on-year (y/y) in April, from 4.1% in March, Statistics South Africa said on Tuesday.

The consumer price index (CPI) is among the data considered by the Reserve Bank when its Monetary Policy Committee decides on interest rates.

Stats SA said headline CPI slowed to 0.3% month-on-month from 1.2% in March.

Economists surveyed by Reuters expected headline y/y inflation to accelerate to 4.4%, while slowing to 0.5% on a monthly basis.

The figure is in line with the Reserve Bank's target of keeping annual CPI between 3% and 6%. The increase in April is also in line with the Reserve Bank's view that inflation would continue to rise steadily this year, and breach the upper end of the inflation target in the first quarter of 2012.

Analysts welcomed the marginal increase.

ETM managing director George Glynos said it was a "pretty decent number".

"I think it will set the trend for what we'll see in the second half of this year where inflation surprises forecasters to the downside and why we believe rate hikes, if there are any, will be pushed out to well into 2012," he said.

"Without fuel prices this number would have been quite a bit lower so it is really cost-push factors that are at play. The rest of the basket remains muted.”

Peter Attard Montalto, emerging market economist at Nomura, said the figure was below his forecast.

"We will have to look at the core print which may not have based as expected, and there is likely a little more pass-through in headline from recent stronger rand. This should perhaps temper some of the market hawkishness after Sarb (the SA Reserve Bank) last week. Remember, we are still looking for (a) November hike."

Inflation has slowly edged up since hitting a ivef-year low of 3.2% in September last year. Rising food and fuel prices drove it to 4.1% in March.

The Reserve Bank last week raised its inflation forecast and said inflation was likely to pierce its 3% to 6% target band briefly, peaking at 6.3% in the first quarter of 2012.

The central bank said it would not hesitate to act on signs that inflation was consistently above the target band. It has left its repo rate unchanged at 5.5% this year, after reducing it by 650 basis points between December 2008 and December 2010. 

sarb  |  interest rates  |  inflation  |  sa economy
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