Inflation cools for the first time this year
In March, consumer price inflation decreased to 5.3% from 5.6% in February. This was lower than what some economists had predicted. The decline was driven food and non-alcoholic beverages prices decelerating to 5.1% in March from 6.1% in February, far from its peak of 14% in March last year, according to Statistics SA. For this category of goods it was also the lowest annual increase since September 2020 when the rate was 3.8%.
Inflation for bread and cereals slowed to 5.0% from 6.1% the month before. It had previously hit a dizzying high of 21.8% in January 2023, Statistics SA emphasized. Bread flour, pasta, rusks, maize meal, ready-mix flour and white bread were all cheaper than a year ago.
Meat inflation also cooled in March on the back of lower beef and mutton prices. The price of meat in March only went up by 0.8%. This increase is much lower than the peak of 11.4% in February 2023. This information comes from the agency's statement.
The consumer price index (CPI) increased 0.8% month-on-month.
Education fees are surveyed once a year in March. Education was 6.3% more expensive in 2024 than a year ago - the highest increase since 2020, when the rate was 6,4%.
Although inflation has decreased compared to last year, it is still above the South African Reserve Bank's target midpoint of 4.5%. The central bank has been clear that it won't cut interest rates until inflation is consistently closer to the middle of its 3% to 6% range.
FNB said signs of consumer trouble justified lowering rates sooner. This would help maintain stability and boost economic growth. The Monetary Policy Committee (MPC) would be responsible for making this decision. This would help maintain stability and strengthen economic growth."
"While inflation may have reached its peak, the ongoing disinflation trajectory remains precarious, underscoring material upside risks and necessitating the MPC to exercise extreme caution in avoiding premature interest rate cuts," FNB said. Lowering interest rates unnecessarily could hinder growth and increase the chances of a technical recession. This is especially true when overall financial conditions are already tight.
SA almost entered a technical recession last year, which means two quarters in a row of the economy shrinking. Fourth quarter GDP was just 0.1% and economic growth for 2023 was recorded at 0.6%.
Many economists expect rate cuts may only start in September or November and have said that petrol price increases amid an escalation of conflict in the Middle East mean that upside risks to the inflation outlook remain.
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