A dip in inflation figures in March is fanning hopes that the Reserve Bank's monetary policy committee will not hike interest rates next month and thus take the pressure off overburdened consumers, even if temporarily. Headline inflation slowed to 6.3% year on year during March from 7% year on year in February as the petrol price dropped by 5.7% last month and cold beverages were 0.4% cheaper, according to data published by Statistics SA this week. This was the slowest rate of inflation since February 2014.But food prices rose by 1.5 percentage points to 9.5%. The hike is expected to be sustained, eating into the real incomes of consumers, particularly those on low incomes.Core inflation - the consumer price index excluding food, fuel and electricity - rose 5.4% year on year in March from 5.7% the month before.story_article_left1John Ashbourne, Africa economist at Capital Economics, forecast that inflation would average about 8% this year. Food and beverages constitute 20% of the CPI basket and significantly affect headline inflation.Stats SA said rising food prices contributed 1.5% to headline inflation in March. The effects of the drought were clear with the indices for fruit and vegetables increasing 18.7% year on year and the index for bread and cereals jumping 13.3% year on year.The slower pace in inflation last month was partly assisted by a stronger rand, which made food imports cheaper. The easing of inflation could motivate a pause in the interest rate hiking cycle when the Reserve Bank's monetary policy committee meets next month.However, Ashbourne said: "We believe that the Reserve Bank will hike rates twice more this year, taking the repo rate from 7.25% to 7.75%."Busisiwe Radebe, an economist at Nedbank, said the rand had strengthened significantly and this could result in interest rate hikes of 25 basis points in both July and September."It is probably very tricky for them [the monetary policy committee] because they probably are thinking how best they can balance rising inflation with weak growth, and a strategy [to] hold [interest rates] next month and raise by 25 basis points in July and 25 bps in September is probably the best way to go."story_article_right2Currency strategists said the stronger rand was fuelled by improved global commodity prices, large capital inflows into South Africa recently and positive sentiment after a Constitutional Court ruling last month that confirmed the court's independence. But they said the rand remained undervalued.Ndzutha Mngqibisa, foreign exchange strategist at Barclays Africa, said from a purchasing power parity viewpoint, the rand should be trading at about R10.48 to the dollar.The rand had recouped the losses suffered after the dramatic firing of former finance minister Nhlanhla Nene on December 9 and his replacement with little-known David van Rooyen for four days. President Jacob Zuma appointed Pravin Gordhan, a former finance minister, to the position following negative market reaction.The rand was trading at R14.59 to the dollar on December 8, a day before Nene's sacking, and continued a losing streak to R16.87 in January before reversing declines.John Cairns, a currency economist at RMB, said this week: "It's recouped all its losses almost exactly. [Today] we would be exactly where we were [before Nene was fired]."..