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Consumer inflation unexpectedly edges down

Johannesburg  - South Africa’s targeted consumer price inflation slowed unexpectedly to 6.1% year-on-year (y/y) in February from 6.3% in January, Statistics South Africa said on Thursday.

The index is used by the Reserve Bank for its inflation target.

On a month-on-month (m/m) basis inflation was at 0.6% - unchanged from January.

Economists surveyed by Reuters had expected CPI to edge up to 6.4% y/y and to 0.8% on a m/m basis.

Ilke van Zyl, economist at Investec Group Economics said CPI was expected to enter the Reserve Bank’s target band during the third quarter of 2012.
“Our official view is that there will be no movements in the interest rate during 2012 but we are in the process of reviewing our forecast. It seems likely that interest rates might start the normalisation process earlier with a hike in November 2012 due to some demand pressures building in the economy.”

Inflation breached the central bank’s 3-6% target in November and has been outside its target band since.

Inflation pressures in South Africa are now likely becoming more generalised, reflecting demand-side pressure rather than only external factors, the central bank warned earlier this month, seeming to signal an eventual monetary tightening.

The bank has consistently said inflation pressures were of a cost-push nature and it would not be appropriate to raise interest rates given the lack of demand-side pressures.



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