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Johannesburg - Monetary authorities in SA "need not rush" to raise interest rates given the latest inflation data, said Moody's Analytics economist Mekael Teshome on Friday.
The consumer price index (CPI) rose slower than expected to 4.2% year-on-year (y/y) in April from 4.1% y/y in March. The market had forecast a 4.4% rise. Core inflation, which excludes food and energy prices, rose 3.1% y/y in April.
The latest CPI figure shows that there's little pressure from domestic demand, Teshome said.
SA Reserve Bank (Sarb) governor Gill Marcus said after the Monetary Policy Committee Meeting last week that the bank would act if the impact of food and oil prices on inflation and their second-round effects became worse than expected.
"Central bankers are nervous that rising consumer prices could create broader price pressures, especially if workers begin demanding wage increases in excess of productivity gains," Teshome said.
The latest data do not warrant a change in the inflation forecast or expectations for monetary policy, he added.
Moody's Analytics expected South African consumer price inflation to average close to 5% in 2011, compared with 4.3% in 2010.
"Rising commodity prices will add upward pressure, as will a weaker currency that raises import costs. We still expect the Sarb's first interest rate increase to occur in early 2012," Teshome said.
He said that unless core inflation heats up, the Sarb should be uneasy about raising the benchmark lending rate (now at 5.5%) before it sees robust growth and falling unemployment.
The consumer price index (CPI) rose slower than expected to 4.2% year-on-year (y/y) in April from 4.1% y/y in March. The market had forecast a 4.4% rise. Core inflation, which excludes food and energy prices, rose 3.1% y/y in April.
The latest CPI figure shows that there's little pressure from domestic demand, Teshome said.
SA Reserve Bank (Sarb) governor Gill Marcus said after the Monetary Policy Committee Meeting last week that the bank would act if the impact of food and oil prices on inflation and their second-round effects became worse than expected.
"Central bankers are nervous that rising consumer prices could create broader price pressures, especially if workers begin demanding wage increases in excess of productivity gains," Teshome said.
The latest data do not warrant a change in the inflation forecast or expectations for monetary policy, he added.
Moody's Analytics expected South African consumer price inflation to average close to 5% in 2011, compared with 4.3% in 2010.
"Rising commodity prices will add upward pressure, as will a weaker currency that raises import costs. We still expect the Sarb's first interest rate increase to occur in early 2012," Teshome said.
He said that unless core inflation heats up, the Sarb should be uneasy about raising the benchmark lending rate (now at 5.5%) before it sees robust growth and falling unemployment.
