CPI rises to 4.1% in March

Statistics South Africa (Stats SA) on Wednesday released the data showing that CPI was higher in March compared to February's 3.7%.

Nedbank economist Carmen Altenkirch said: "Consumer inflation accelerated in March, rising well above market expectations. Higher food and petrol prices as well as housing costs were mainly responsible for the 1.2% month-on-month rise. The annual increase in education costs, which is surveyed in March, also contributed towards the month-on-month increase."

In March, the food and non-alcoholic beverages index increased by 1.2% while the alcoholic beverages and tobacco index increased by 3.7% between February and March. The clothing and footwear index as well as housing and utilities index and the education index also increased.

In the next few months, higher foods and fuel prices are likely to be the dominant factors.

"The rand has held up better than anticipated and further rand strength will contain the impact of rising global commodity prices on inflation," said Nedbank, adding that upside risks could stem from a sharper than expected depreciation of the rand, high global food prices, further oil price increases as well as high global food prices.

"The upside to our interest rate forecast has increased over the past month, given the persistent surge in food, oil and other commodity prices. The Reserve Bank may opt to react pre-emptively, hiking rates in the second half of the year. However, we believe that this would do little to contain inflation and risks curbing the economic recovery. As a result, the Reserve Bank is only forecast to raise interest rates in January 2012," said the bank.

In March, the central bank at its kept rates unchanged at 5.5%.