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South Africa Inflation Rate Falls Below Target Midpoint in April

South Africa Inflation Rate Falls Below Target Midpoint in April

(Bloomberg) -- South Africa’s annual inflation slowed for the first time in three months, with the rate falling below the midpoint of the central bank’s target range, after moderation in food-price growth tempered an increase in the cost of gasoline.

Annual consumer-price growth decelerated to 4.4% from a year earlier compared with 4.5% in March, the Pretoria-based Statistics South Africa said Wednesday in a statement on its website. The median estimate of 22 economists in a Bloomberg survey was 4.5%.

South Africa Inflation Rate Falls Below Target Midpoint in April

Key Insights

  • Underlying inflation pressures are receding with annual core inflation, which excludes the cost of food, non-alcoholic beverages, fuel and electricity, slowing to 4.1%, the weakest pace of increases since March 2018.
  • While inflation has remained within the central bank’s target band of 3% to 6% for more than two years, all 25 economists in a separate Bloomberg survey see the Monetary Policy Committee leaving the key interest rate unchanged at 6.75% Thursday.
  • The MPC seeks to anchor inflation expectations at 4.5%. It sees price growth averaging at 4.8% in 2019 and its quarterly projection model prices in one rate increase of 25 basis points by year-end.
  • Main driver of inflation in April was an increase in the price of gasoline, while the advance in the cost of food remained subdued at 2.3%.

What Bloomberg’s Economist Says

“This affirms our assessment that a run-up in transport inflation would be offset by a one-percentage point increase in value-added tax in April 2018 falling out of the annual comparison. We expect rising food prices and a modest increase in the contribution from transport costs should push inflation toward 5% in the next few quarters. We see inflation accelerating more rapidly in the second half of 2019 and the first quarter of 2020 than the Reserve Bank is currently.”

--Mark Bohlund, economist
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To contact the reporters on this story: Prinesha Naidoo in Johannesburg at pnaidoo7@bloomberg.net;Tshegofatso Mokgabodi in Johannesburg at tmokgabodi@bloomberg.net

To contact the editors responsible for this story: Rene Vollgraaff at rvollgraaff@bloomberg.net, Ana Monteiro

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