SA's inflation rate remained unchanged at 5.90% in April 2022 Inbox: PSG
SA's Consumer Price Index (CPI) remained unchanged at 5.90% in April 2022. Economists expect that the South African Reserve Bank (SARB) could hike the repo rate by 50 basis points (bps) to 4.75% this Thursday. In an attempt to tame inflation which has reached the upper end of the bank’s target range of between 3% to 6%. We remain watchful of the impact of fluctuations in inflation and interest rates on shares exposed to substantial discount-rate risk over this period and we will continue to adjust our products when warranted.
The Event
- South Africa’s annual Consumer Price Index (CPI) remained unchanged at 5.90% in April 2022.
- This was largely driven by a spike in food and non-alcoholic beverages of 6%, housing and utilities (which rose by 4.80%), transport increased by 14.70%, while miscellaneous goods and services rose by 3.80%.
- On a monthly basis, inflation increased by 0.60%, following a 1%increase in the previous month.
- Annualised core inflation, which excludes food, non-alcoholic beverages, fuel, and energy prices, rose to 3.90%in April 2022, meeting predictions.
The impact
- Shortly after the data was released at 10h20 the FTSE/JSE All Share Index rose to 0.35%. The biggest winners of the morning session were South32 (up 4.20%), Alphamin (2.94%) and Gold Fields (1.82%).
- The rand was in the green at 10h35 trading at R15.95 to the US dollar, R16.77 to the euro and R19.79 to the British pound.
- South Africa’s 2-year government bond yield increased to 5.64%, the 5-year and 10-year yields came in at 8.41% and 10.79%, respectively.
The assessment
- Economists expect that the South African Reserve Bank (SARB) could hike the repo rate by 50 basis points (bps) to 4.75% this Thursday. In an attempt to tame inflation which has reached the upper end of the bank’s target range of between 3% to 6%.
- A weaker rand at the moment compared with the bank’s quarterly projection model of R15.40/USD could also impact the SARB’s decision.
- We remain watchful of the impact of fluctuations in inflation and interest rates on shares exposed to substantial discount-rate risk over this period and we will continue to adjust our products when warranted.
- The next release date for inflation data is scheduled for Wednesday, 22 June 2022.
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