CPI slows to 4.4% in April

Economtrix economist Dr Azar Jammine says the decrease, which comes in spite of a series of fuel price hikes, paints a positive picture of the inflation environment.

The downside, Jammine says, is the fact that the economy is weak.

"It speaks to the inflationary environment being extremely subdued. On the negative side, that is a reflection of the weakness of the economy and the fact that weaknesses can’t pass on cost increases. But it does mean the chance of interest rates coming down rather than going up have increased slightly."

Jammine says there is an expectation that inflation could rise during the second half of the year due to the possibility of higher food prices and electricity tariffs.

He predicts that by the end of 2019 inflation could be around 5%, which is close to the upper end of the Reserve Bank’s target range of between 3 and 6%.  

Similarly, Jammine believes the interest rate will also show an upward trajectory.

"I do not believe the repo rate will be reduced tomorrow (Thursday) as yet. But certainly if this trend of inflation coming in below what has been expected persists, then later in the year it is conceivable that we may have interest rates coming down."

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