Johannesburg — South Africa’s inflation rose marginally in April due to higher food prices but remained below the central bank’s target range, statistics agency data showed on Wednesday.
Headline consumer inflation stood at 2.8% year-on-year last month compared with 2.7% in March, while in month-on-month terms, inflation was at 0.3% in April from 0.4% in March.
Economists polled by Reuters had forecast annual inflation would remain steady at 2.7%, below the central bank’s 3% to 6% target range.
Deputy Finance Minister David Masondo said last week that a new inflation target could be announced soon, leading to speculation that it could feature in Wednesday’s budget presentation.
South African Reserve Bank Governor Lesetja Kganyago has for years stressed his preference for a lower inflation target, saying it is needed to make the economy more competitive.
But Finance Minister Enoch Godongwana, who would need to sign off on a lower target, has been reluctant, citing inflationary risks from pervasive poverty and high unemployment.
The prospect of a lower inflation target has lifted the rand, with economists saying a lower target would reduce the likelihood of further interest rate cuts.
“If the Treasury announces a lower inflation target as part of the budget later today, it’s likely that the SARB will stay on the sidelines for some time,” said Jason Tuvey, deputy chief emerging markets economist at Capital Economics.
The next monetary policy announcement by the central bank is scheduled for May 29.
It kept its main lending rate unchanged in March after three consecutive cuts, citing risks from U.S. President Donald Trump’s global trade war and local budget disagreements.
Annual inflation for food and non-alcoholic beverages increased to 4.0% in April, the highest annual rate since September last year, Statistics South Africa said.
*Bhargav Acharya, Sfundo Parakozov; editing: Alexander Winning & Ros Russell – Reuters
