* Inflation surprises on downside, could ease into target
soon
* Bonds firmer after data, rand weakens
(Adds comment, market reaction, background)
JOHANNESBURG, March 22 (Reuters) – South Africa’s targeted
consumer inflation slowed unexpectedly in February, data showed
on Thursday, suggesting price pressures that have pushed it
above the Reserve Bank’s target are ebbing and giving the bank
leeway to keep interest rates on hold.
Inflation breached the central bank’s 3-6 percent target in
November and has been above the band since then.
But CPI braked to 6.1 percent year-on-year in February from
6.3 percent in January, Statistics South Africa said. On a
month-on-month basis, inflation was at 0.6 percent, unchanged
from January.
Economist surveyed by Reuters had expected CPI to edge up to
6.4 percent year-on-year and to 0.8 percent on a month-on-month
basis.
“Markets will be encouraged by the drift closer towards the
upper end of the 3-6 percent inflation target,” said Razia Khan,
Head of Africa Research at Standard Chartered.
“The 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 Marcus
recently.”
Inflation pressures are now likely becoming more
generalised, reflecting demand-side pressure rather than only
external factors, Marcus warned earlier this month, in what the
market took as a signal of eventual monetary tightening.
Continued…
