In March, SA’s inflation was lower than expected, with headline inflation down to 5.3% y/y from 5.6% in February. However, there are pressures in key administered prices such as water and electricity, medical aid and education, which are unlikely to ease given the infrastructure backlog. This will make it hard for the SARB to achieve its inflation target of 4.5% or less – in fact, the SARB may do well to restrain inflation below 6%.

In the US, data such as retail sales and labour market conditions remain buoyant, while GDP growth expectations have been revised up to 2.2%-2.3% for the year, which is above trend. Inflation surprises over the past three months indicate the US Federal Reserve is not in a position to cut interest rates. A June rate cut is probably off the table and it is possible that cuts may not start this year.