CPI inflation dips on food prices

CONSUMER price inflation for January came in weaker than expected on lower food prices, backing the case for leaving interest rates unchanged.

CONSUMER price inflation for January came in weaker than expected on lower food prices, backing the case for leaving interest rates unchanged.

Stats SA said yesterday consumer price inflation slowed to 6,2percent year-on-year in January, compared with 6,3percent in December. On a monthly basis CPI was unchanged at 0,3percent.

The annual reading was lower than the 6,4percent consensus in a Reuters poll last week, strengthening the case to leave interest rates unchanged.

Economist at RMB Carmen Nel said: "We think they will keep rates steady this year . in the context of what has happened this week - the positive GDP growth in the fourth quarter of last year and the (central bank's) comments yesterday that they will cut (rates) on the basis of January CPI data."

Food inflation, which helped drive CPI to about 14percent in 2008, slowed to 2,4percent year-on-year, from 3,6percent in December.

The central bank said on Tuesday the prospects for food prices were one bright spot in the inflation outlook and it did not see pressures coming through in the next few months.

The Reserve Bank expects inflation to come back to its 3 to 6percent target band in the first quarter of 2010, but lurking on the horizon when January's inflation figures were released yesterday was significant power price increases as state-owned utility Eskom has been granted raised tariffs of about 25percent annually over the next three years. - Reuters

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