JOHANNESBURG: Headline inflation slowed in April to 6.2 percent from 6.3 percent in the prior month, giving rise to hopes this may lead to a pause in the Reserve Bank’s tightening cycle today. The central bank has raised its benchmark rate by 100 basis points in its last three meetings to 7 percent. It has stressed its mandate to protect price stability despite the increasing risk of recession this year.
Another boost to the economy is data by Statistics SA yesterday, which shows retail sales grew by 2.8 percent year on year in March after 4 percent growth in March. Core inflation, which excludes food, fuel and energy prices, grew marginally to 5.5 percent from 5.4 percent. Annabel Bishop, the chief economist at Investec, said core inflation felt the upward pressure from high state-administered price inflation from water and other services of 9.8 percent year on year.
She said last month’s large petrol price hike limited the scope for a substantial retreat in headline inflation. “The fall in the petrol price in late 2014 and early 2015 created a low base effect, without which the outcome for consumer price index inflation in the first quarter would have been closer to 6 percent year on year instead of the outcome of 6.5 percent,” Bishop said.
Ian Watson, the chief executive of DebtBusters, said while his organisation recognised it remained imperative to curb inflation, an increase in the repo rate would hurt the over-indebted consumer the most. “We fear that these consumers are already being squeezed too much. Consumers with vehicle finance, mortgages, clothing accounts and credit cards are going to feel it the most,” he said.
