Picture: ISTOCK
Picture: ISTOCK

Inflation moderated to 4.4% in January from 4.7% in December, raising hopes of an interest-rate cut in March.

Inflation, as measured by the annual change in the consumer price index (CPI), was expected to slow in January thanks to a drop in fuel prices. The slowdown to 4.4% was better than the 4.5% economists’ consensus reported by Trading Economics.

Statistics SA reported on Wednesday that January’s CPI, which was set to 100 points in December 2016, rose to 105 points from 104.7 points in December.

The annual change in CPI is the key measure used by the Reserve Bank’s monetary policy committee to set its repo rate. The committee is scheduled to announce its next interest rate decision on March 28.

At 4.4%, inflation is now slightly under the halfway mark of the Reserve Bank’s target range of keeping inflation above 3% but below 6%.

"Our forecast is for a 25 basis point reduction in March. Thereafter, the rates are expected to remain steady until September 2019," Nedbank's economics team said in a note e-mailed on Wednesday.

In January, the retail price of 93 octane petrol fell 29c per litre and 95 octane fell 34c per litre. The wholesale price of 0.05% sulphur diesel fell 22c per litre and 0.005% sulphur diesel fell 26c a litre.

The fuel component of CPI fell 1.3% from December to January, but rose 9.1% over the year, Statistics SA reported.

Items in the CPI basket, which became cheaper in January compared to the same month in 2017, included bread and cereals with deflation of 5.1%, fruit with deflation of 3.6%, and oils and fat with deflation of 3.4%.

The price drops helped mitigate meat inflation of 13.4% to bring average food inflation to 4.6%.