Consumer inflation edged up to 2.8% year on year in April from 2.7% the previous month, Stats SA said on Wednesday.
Falling fuel prices and weak demand pressures have helped to slow inflation in recent months, reinforcing calls for further rate cuts this year.
The 0.3% month-on-month increase in the consumer price index (CPI) was driven primarily by higher housing and utilities prices, which rose 4.4% year on year in April, and food prices, which gained 4%.
However, slowing inflationary pressures kept consumer price increases comfortably below the Bank’s 3%-6% target range in March and April, with inflation below 6% since June 2023.
Investec economist Annabel Bishop said the overall moderation in consumer inflation in recent months was due to marked declines in fuel prices and lower agricultural prices, with a stronger rand and weak demand pressures adding support.
Excluding fuel, energy, food and nonalcoholic beverages, SA’s core inflation reflects a “very moderate underlying inflation picture,” she said.
In line with the benign inflation picture, Bank of America (BofA) revised its monetary policy outlook for SA last week and now expects two more interest rate cuts this year.
Business Day reported that a BofA survey of local fund managers suggested high interest rates were now overwhelmingly seen as a drag on SA’s recovery.
“We expect that the Reserve Bank will leave interest rates unchanged at its meeting this month, as it remains concerned over the high degree of uncertainty in the global outlook,” said Bishop.
“However, much will depend on whether new inflation targets are announced in the budget later today, with National Treasury setting the inflation targets and the Reserve Bank responsible for achieving them.”
Bishop said lowering the midpoint to 4% year on year was likely to eliminate the possibility of further rate cuts this year, with the Bank forecasting inflation at 4.5% year on year in both 2026 and 2027.
Rising food prices added to inflationary pressures in April, with inflation for food and nonalcoholic beverages increasing by 1.3% compared to March, the largest increase since October 2023.
Business Day reported that asset manager Anchor expected food inflation to rise moderately in the coming months, driven by uncertainty surrounding US policy direction and its potential effect on global markets and the rand.
April’s rise in food and nonalcoholic beverages inflation was mainly due to higher meat prices, which increased by 2.3% on average between March and April, the highest monthly rise since January 2023.
Meat is the largest weighted group in the food and nonalcoholic beverages category, and accounts for 5.1% of total household spending.
Among the hot beverages, instant coffee continues to record the highest increase, with prices rising by 20.2% in the 12 months to end-April.
“To give this some context, we can see that coffee prices are elevated across the globe. The World Bank commodity index for robusta-type coffee beans increased by 28.1% over the same period,” said Price Statistics chief director Patrick Kelly.
The price index for alcoholic beverages and tobacco rose by an annual 4.7%, probably reflecting the effect of excise tax increases, said Kelly.
On average, fuel prices declined by 3.2% between March and April, with motorists now paying 13.4% less for fuel than a year ago.
Bishop said May’s CPI outcome would probably be similar to April’s, thanks to a 22c/l drop in the petrol price this month.
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