The increase in South Africa's consumer price index, which is used by the South African Reserve Bank (SARB) for its inflation target, was up 8.5 percent year-on-year in March from 8.6 percent y/y in February, Statistics South Africa (Stats SA) said on Wednesday.

This comes after the declining trend was broken in February and will thus provide some solace for the markets. Previously there had been a five monthly decline after the record 13.6 percent registered for CPIX - the old targeted measure - in August last year and the 13.7 percent for the old CPI in August.

CPI was up 1.3 percent month-on-month after increasing 1.2 percent in February.

Consumer inflation was expected to have receded to an 8.4 percent increase, according to a survey of leading economists by I-Net Bridge.

Forecasts among the leading economists surveyed for CPI ranged from 7.9 percent to 9.1 percent. CPI was at 8.9 percent a year ago.

Economists react to the CPI data:

Chris Hart, Investment Solutions:

"It's slightly higher than the consensus. Inflation might be proving to be a bit sticky, but we still believe it is in a downward trend, so there is still scope to lower interest rates.

"We would like to see the next figure easing quite a bit from this."

Annabel Bishop, Investec Group Economics:

"CPI is marginally higher than expected. However, we continue to expect a 100bp cut in interest rates at this week's MPC meeting where the focus is likely to have shifted from inflation to the potential deepening and lengthening of the SA recession.

"Indications are that the SA economy could remain in recession this year. Should this scenario become more likely as economic data is released which supports it such as yesterday's liquidation statistics and January's leading indicator, this week's 100bp interest rate cut is unlikely to be the last substantial one in the current interest rate cycle as there is now the growing possibility of a 100bp cut in interest rates in June rather than the currently expected 50bp easing.

Mike Schussler, Economists.co.za:

"I think that the inflation rate is going to take longer to decline than previously expected, and I doubt if we're going to get to get into the six percent mark before 2010.

"The service side of inflation is the one that's going to be sticky and be with us for quite some time. Food price inflation is still relatively high, but overall better than the previous month.

"The number is not good for the bond market in the short-term or the rand in the long term."

Danelee van Dyk, Standard Bank:

"It's marginally higher than market expectations. This signals rigid price pressures in the system and we expect this will remain sticky in the short term.

"We don't expect this reading to derail higher interest rate cuts at the meeting tomorrow."

I-Net Bridge