Economists weigh if inflation surprise could give SARB MPC reason to cut repo rate

DURBAN - Some economists have started to weigh if an inflation surprise could give the South African Reserve Bank (SARB)’s monetary policy committee (MPC) reason to lower borrowing costs in the next repo rate decision.

Inflation came in at a softer 2.7% in March, from 3.2% in February.

The inflation reading released by Stats SA on Wednesday beat market expectations, making it the lowest in almost five years.

The annual rate for food & non-alcoholic beverages edged lower to 2.7% in March from 2.8% in February.

Lower rates were recorded for oils and fats, hot and cold beverages, milk and other dairy products, eggs and desserts.

Inflation for cereal products also accelerated, mostly driven by maize meal prices.

Chief director for price statistics at Stats SA, Patrick Kelly, said: "There is some good news, however. Monthly increases for maize meal have recently slowed, from 4.8% in January to 2.4% in February and 1.4% in March."

Headline consumer inflation is now below the reserve bank’s target band of 3% and 6%.

The central bank’s MPC prefers to anchor inflation at the 4.5% midpoint.

While cooler inflation could help ease pressure on policy rates, United States (US) President Donald Trump’s tariff wars are still among the risks to inflation and the rand.