Headline Inflation Expected To Tick Lower But Stay Above Target Mid-Point

South Africa will release March CPI data tomorrow (April 17) at 09:00BST/10:00SAST. Consensus sees headline inflation moderating to +5.4% Y/Y from +5.6% in February, which was an upside surprise (vs. +5.5% expected). Bloomberg's median estimate for core CPI is +4.9% Y/Y vs. +5.0% recorded in February. This means that both metrics are expected to stay above the +4.5% Y/Y target mid-point, which the SARB is focusing on.

• JP Morgan write that "inflation probably eased to +5.4% Y/Y in March amid contained goods inflation." Their base case sees food inflation at around +5.0%-5.5% Y/Y into mid-year, despite the lingering El Nino risk. They note that the SARB continues to signal hawkish bias, which keeps a higher-for-longer policy stance on the table.
• MUFG see CPI inflation at +5.5% Y/Y as "the one-off impact of administrative price increases in February fell away." They think that El Nino weather patterns will only have modest effects on food prices, while fuel prices should tick higher in 2Q24. They believe that resilient price pressures will keep the SARB from cutting rates this year.
  
• Nedbank expect headline inflation to print at +5.5% Y/Y. They see prices rising by 0.9% M/M, driven mainly by fuel prices. They note that "March is also a heavy survey month, with items such as actual rentals for housing, owners' equivalent rent, electricity and other fuels, school and university fees, as well as local bus fares scheduled for the survey." These will contribute to price increases, in their view, despite further moderation in food prices.