South Africa’s inflation rate eased to 6.1 percent in February, a better-than-expected shift closer towards the central bank’s target ceiling, the national statistics agency said on Thursday.
The rate was down from 6.3 percent in January as food prices dropped, Statistics South Africa said. Month-on-month, inflation was at 0.6 percent.
February was the fourth month running in which 12-month inflation was above the South African Reserve Bank’s target ceiling of six percent, but was in line with predictions that it will dip back down in the first quarter of 2012.
Between January and February, food prices dropped 0.5 percent, the statistics agency said.
The average inflation rate for 2011 was 5.0 percent, against 4.3 percent in 2010 and 7.1 percent in 2009.
The Reserve Bank has held its benchmark interest rate steady at 5.5 percent since November 2010 — the lowest level in three decades — and is struggling to balance calls for another reduction to boost the economy and a gradual increase.
“Immediate market reaction is likely to be that this allows the SARB to keep interest rates on hold a while longer, despite the more hawkish comments we’ve had from Governor (Gill) Marcus recently,” said Razia Khan, the head of Africa research at Standard Chartered Bank.
“However, this clearly needs further thought — the SARB will never be setting interest rate policy now on the expectation of inflation outcomes this year — they’re looking further out of course.”
“As Governor Marcus herself warned, there are uncertainties to reckon with,” including the impact of higher oil prices and increased levies in the latest national budget, she said.