By Lehlohonolo Lehana.
Statistics SA has published the latest inflation numbers, showing annual consumer inflation slowed to 6.8% in April from 7.1% in March.
This is the lowest reading since May 2022, when the rate was 6.5%. The decrease in inflation was also larger than market expectations, where economists pegged the rate at 6.9%.
However, the inflation rate remains outside the South African Reserve Bank’s target range of 3% to 6%.
Inflation for food and non-alcoholic beverages inched back to 13.9 percent in April from 14 percent in March, having experienced record increases over the past 12 months.
Milk, eggs and cheese products recorded an annual price increase of 14.5 percent, the largest rise since January 2009, according to StatsSA.
“On average, vegetables were 23.1 percent more expensive in April 2023 compared with April 2022,” the agency said. “This is the highest annual rate since November 2007.”
Onions experienced a 52.8 percent hike in cost. Carrots, peppers and potatoes also pushed the rate up, although prices for meat, oils and transport fell back.
The inflation data comes ahead of the Reserve Bank’s repo rate decision on Thursday. In the wake of the rand’s recent tumble, economists have flagged the increased likelihood of the Reserve Bank hiking the repo rate by another 50 basis points.
The rand strengthened ahead of Wednesday’s inflation data, but it still held above R19 against the dollar.
Before the recent bout of currency weakness, the Bureau for Economic Research (BER) said it had expected a 25 basis point hike, signalling the end of the tightening cycle. Even if the Reserve Bank hikes by 50 basis points on Thursday, “it is now less clear whether that will bring the hikes to an end”, the BER said.
Investect chief economist Annabel Bishop said despite a 25 or 50 basis point hike expected this week, an even more aggressive 75 basis point rise is needed to strengthen the rand meaningfully.
Bishop said, interest rates are expected to fall next year, if not by the fourth quarter of 2023. Inflation is forecast to come in lower in the second half of this year compared with the first half and to fall during the course of 2024.