PPS Investments commentary on Stats SA’s CPI for March

Consumer price inflation increased by 4.5% year-on-year as at the end of March 2019. This was up from the 4.1% year-on-year increase in February. The 4.5% year-on-year increase was however slightly lower than the forecasted 4.6% increase. The increase was largely due to transport contributing 0.5% in February and 0.9% in March.

For the second consecutive month, inflation increased by 0.8% month-on-month. The contribution to the month-on-month increase was spread between alcoholic beverages and tobacco (0.2%), housing and utilities (0.1%), transport (0.3%) and education (0.2%).

The Reserve Bank governor has recently emphasised the goal of fixing the inflation expectation at 4.5%. While this latest print at 4.5% may be in line with this expectation, the positive trajectory is somewhat of a concern. This likely means that even though inflation is at the midpoint of the target band, the next move in interest rates is more likely a rate hike than a decline.