CPI eases to 6% in March

Wednesday, April 18, 2012

Pretoria - The Consumer Price Index (CPI) eased to 6% in March, Statistics South Africa (Stats SA) said on Wednesday.

Expectation was that it would ease to 6%, off from 6.1% in February, which was above the Reserve Bank's inflation target of between 3% and 6%.

"On average, prices increased by 1.1% between February 2012 and March 2012," said Stats SA.

This was due mainly to increases in the housing and utilities index, as well as rises in the alcoholic beverages and tobacco index.

Nedbank economists expect inflation to hover above the central bank's limit of 6% for much of 2012, while, Standard Bank said it believed that the peak in inflation was already over.

Nedbank said: "Inflation is expected to hover above the 6% limit for much of 2012, peaking at 6.4% around August before drifting lower, only to slip back into the target band in the second half of 2013. Inflation will stay elevated off the low base established early last year, mainly due to persistent pressure from rising food, fuel and administrative prices.

"A weaker rand is likely to add to the mix later in the year. These stresses will be partly offset by softer growth in domestic spending and excess production capacity, which is likely to contain retailers' pricing power and prevent a build-up of significant secondary inflationary effects."

Standard Bank expects the Reserve Bank to raise interest rates only in the second half of next year.

"Today's March CPI is in line with our expectations, possibly confirming the peak in CPI in quarter one of 2012. We reiterate that the SARB is likely to hike interest rates only in the second half of 2013. We believe that the market's expectation of a rate hike in the next 12 months will ease. The SARB is likely to keep interest rates unchanged in the next 12 months," said Standard Bank.

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