Huge petrol price increases likely to fuel inflation rate

The consumer inflation index - the measure used by the Reserve Bank in setting its inflation target range - is expected to tick up to 4.4% year-on-year in April from 4.1% in March, according to a survey of nine economists by I-Net Bridge.

Forecasts among the economists ranged from 4.4% to 4.6%.

Standard Bank analyst Adriaan du Toit said food inflation had been gaining momentum at the manufacturing level because of big price increases in soft commodities.

''If the effect of higher petrol prices becomes more broadly based, CPI could soon pierce the midpoint of the inflation target range [4.5%] despite the recent dip in oil prices."

Any price increase spillover into other categories could put pressure on the Bank to raise the repo rate earlier than expected, according to Du Toit.

Announcing the interest rate decision last week, Reserve Bank governor Gill Marcus noted that inflation would temporarily breach the 3% to 6% target band in the first quarter of 2012 at 6.3%.

Though Marcus said this did not mean an immediate increase in rates, she said the bank would act if needed.

The "hefty" 54c a litre increase in the petrol price would fuel CPI, said KADD Capital economist Elize Kruger.

Stats SA will release its CPI data tomorrow. - I-Net Bridge