South Africa: Inflation moderates in March
Inflation came in at 5.3% in March, down from February’s 5.6%. March’s print came in below market expectations. Looking at the details of the release, prices for food and non-alcoholic beverages rose at a slower pace in March, as did transport prices. These developments more than offset a faster rise in prices for housing and utilities.
Accordingly, the trend pointed down mildly, with annual average inflation coming in at 5.5% in March (February: 5.7%). Meanwhile, core inflation fell to 4.9% in March, from February’s 5.0%.
Lastly, consumer prices rose 0.79% in March over the previous month, moderating from February’s 0.98% rise.
Our Consensus sees inflation averaging above the mid-point of the South African Reserve Bank (SARB)’s 3.0–6.0% target band until Q4 2024; drought conditions and higher oil prices will drive food and transport price growth. That said, a stronger rand against the USD later this year and the delayed impact of past interest rate hikes will help keep inflation within the target range this year. Potential changes in the fiscal policy stance ahead of and after the 29 May general elections is a two-sided risk.
Meanwhile, March’s mild downtick in inflation is unlikely to motivate the SARB to kickstart its loosening cycle when it makes its next monetary policy decision on 28–30 May.