South African inflation slows for the first time in seven months to 6.3 percent in March as fuel prices fell.
The worst drought in more than a century is driving up food costs, adding to pressure on consumer prices caused by the rand’s 25 percent fall against the dollar in 2015.
The Reserve Bank’s Monetary Policy Committee increased its benchmark repurchase rate four times since July to 7 percent and has said inflation will only return to its 3 percent to 6 percent target range in the final quarter of next year.
Given the Reserve Bank’s inflation forecast and “hawkish policy bent, the repo rate is likely to rise further this year in order to maintain real interest rates in positive territory,” Kamilla Kaplan, an economist at Investec in Johannesburg, said in an e-mailed note to clients before the data was released.
A persistent breach of the Reserve Bank’s inflation target will require a policy response to achieve slower price growth, Deputy Governor Daniel Mminele said on April 16. The central bank has cut its economic growth forecast for South Africa to 0.8 percent, the slowest rate since the 2009 recession.
The yield on the benchmark 10-year bond dropped five basis points to 8.86 percent at 10:20 a.m. in Johannesburg.
Core inflation, which excludes food, non-alcoholic beverages, gasoline and electricity costs, slowed to 5.4 percent in March, the lowest rate since December, from 5.7 percent.