Africa-Press – South-Africa. JOHANNESBURG – The rand showed muted reaction as inflation beat expectations, while the South African Reserve Bank is seen as tolerating a negative real interest rate differential, according to NKC Research.
The inflation surge, at 4.4 percent y-o-y, was expected but, nonetheless, beat the consensus forecast by 0.1 ppts. While the latest inflation print adds to pressure for monetary authorities to join a slew of emerging markets with a tightening cycle, we continue to expect that the repo rate will be kept at 3.5 percent.
Apart from the transitory nature of inflation, the demand-side remains on the weak side. Well behind on its vaccination targets, South Africa remains on the so-called “red list” for travel, prolonging pain in the tourism industry and weighing on recovery prospects.
The latest consumer price index inflation print released indicates that, as expected, inflationary pressures intensified in April.
Specifically, inflation rose to 4.4 percent y-o-y in April, from 3.2 percent y-o-y in March. The main contributors to the annual inflation rate remained the sub-indices pertaining to food and non-alcoholic beverages, housing and utilities, transport, and miscellaneous goods and services.
The costs of food and housing & utilities increased by 6.7 percent y-o-y and 2.3 percent y-o-y, respectively.
At the close of local trade, the rand quoted 0.28 percent weaker at R14.04/$.
BUSINESS REPORT ONLINE
