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Consumer Price Inflation rate decreased to 5.7% in January

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Figures released by Statistics South show that the headline Consumer Price Inflation (CPI) decreased to 5.7% in January from 5.9%  in December, largely due to lower fuel prices.

Motorists and businesses breathed a little easier in January as fuel prices dropped by 2.8%  from the record highs in December 2021.

Other contributors to the ease in the annual inflation rate were food and non-alcoholic beverages, housing and utilities, and miscellaneous goods and services.

Core inflation, which excludes food and non-alcoholic beverages, as well as fuel and energy prices from the CPI, came out at a subdued 3.5% , reflecting the impact of higher commodity prices.

An Economist at Nedbank, Candice Reddy, says food and fuel inflation, as well as the rand-dollar exchange rate remains a risk to the inflation outlook.

“The upside risk to the food inflation is due to weather conditions globally and generally and still elevated global food prices which will kind of offset the optimistic crop outlook domestically. And then on the transport of fuel side, although we do have oil prices focused to fall throughout the year we have seen that it has persisted at higher levels for much longer due to supply constraints, so the trajectory will depend much on developments on the supply side,” says Reddy.

An Economist at Absa Bank, Miyelani Maluleke, says while higher fuel inflation remains a risk as a result of rising Brent Crude Oil prices, the Reserve bank is not expected increase rates too rapidly.

“We probably going to see more interest rate increases this year probably into next year, but we don’t think that the SARB is going to be aggressive in its interest rate cycle. We do have an economy that remains relatively weak, it’s still recovering from the impact of the COVID-19 pandemic. And I think with an inflation trajectory that is heading downwards over the rest of the year, we don’t think that they’ll be wanting to increase interest rate too quickly,” says Maluleke.

Analysts have warned that a petrol price increase of around one-rand-twenty cents maybe on the cards from March.

CPI eased slightly in January, thanks to the fuel price decrease:

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