Pretoria: The Consumer Price Index (CPI) accelerated to 5.8% year-on-year in January, Statistics South Africa (Stats SA) said on Wednesday.
“Headline CPI annual inflation rate in January was 5.8%. This rate was 0.4% higher than the corresponding annual rate of 5.4% in December 2013,” said Stats SA.
Market expectation was for CPI to come in at 5.7% year-on-year.
Prices increased by 0.7% between December 2013 and January 2014, said Stats SA.
Between December and January, the food and non-alcoholic beverages index increased by 1.6%, while the transport index increased by 1.2% and that of miscellaneous goods and services increased by 0.5%.
“The latest figures highlight the inflationary pressures emanating directly from the weaker currency as the monthly rise mainly stems from higher food and fuel prices. Despite little evidence so far of second round effects, inflation is likely to continue rising, breaching the Reserve Bank’s 6% upper target range in the second quarter of the year and remaining above 6 % for a few months after that. The biggest risk to consumer inflation remains the volatile currency and perhaps food prices,” noted Nedbank economists.
The bank expects the Reserve Bank to raise the repo rate by 50 basis points at its next Monetary Policy Committee (MPC) meeting scheduled for 25 – 27 March.
The central bank is expected to keep rates steady until the second half of 2015 due to a weak economy and more settled markets.
The inflation outlook remains poor with the threat of further rand depreciation in the short term. Economists therefore expect that the Reserve Bank will raise rates by 50 basis points at the next Monetary Policy Committee meeting but then keep rates steady until the second half of 2015 due to a weak economy and more settled markets.
At its first meeting of the year the MPC in January raised the repo rate by 50 basis points to 5.5%.
SOURCE: SA NEWS