CPI for April 2021

Consumer price inflation increased by 4.4% year-on-year as at the end of April 2021, which was greater than the 3.2% year-on-year increase from the previous month. After hovering around the bottom of the target band for a year, inflation increased sharply to close to the midpoint of the band.

This was widely expected as a result of the base effect and the recent increase to certain sectors of the inflation basket. Month-on-month inflation increased by 0.7% in April 2021, equivalent to the monthly increase over the two previous months.

This increase in inflation appears to have justified the South African Reserve Bank’s choice to not further reduce short term interest rates in their most recent meetings, even though inflation was low. Their forecast that inflation will increase to around the mid-point of the target band and the subsequent realisation of this, is likely to signal the end of the cutting cycle although rate hikes, at this stage, are only expected to start towards the end of the year.