CPI expected to ease in March

[newsroom]

Pretoria - The Consumer Price Index (CPI) to be released this week is expected to slow down to 5.1 percent year-on-year.

“We are expecting it to slow down quite sharply at 5.1 percent year-on-year compared to February’s 5.7 percent,” Nedbank economist Carmen Altenkirch told BuaNews on Monday.

Statistics South Africa (Stats SA) is due to release the March figure on Wednesday. In February, inflation (which came in at 5.7 percent year-on-year) fell within the central bank’s band of between 3 and 6 percent for the first time in three months.

“The reasons for the slowing down of inflation are the further moderation of food inflation and prices in durable and semi goods because of a combination of the Rand strength as well as weak domestic demand,” she said.

Market consensus is that CPI will come in at 5.1 percent.

“CPI is expected to increase by 0.7 percent month-on-month in March and 5 percent year-on-year down from 5.7 percent year-on-year in February,” said Standard Bank in its weekly economic commentary.

Last week, Reserve Bank governor Gill Marcus said the repo rate was likely to remain unchanged for a while.

Last month, the Monetary Policy Committee (MPC) surprisingly cut the repo rate by 50 basis points to 6.5 percent.

"However, the scope for further easing is limited, and the repurchase rate is likely to remain stable for some time," said Marcus at the time.

She said the domestic demand was still relatively weak but showed signs of recovery, adding that it was to remain relatively constrained because of high household debt levels, unemployment and credit extension by banks which remains subdued.

The MPC meets again next month to decide on whether to change rates or keep them as is.

Altenkirch said the MPC may still cut the repo rate at the July meeting. - BuaNews