March inflation at 2.7% brings another cold shower for doves
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Annual consumer price inflation remained essentially unchanged at 2.7% in March 2025, according to the preliminary estimate of the CZSO, which was above analysts' expectations (2.55%).
The steady year-on-year CPI growth reflects a year-on-year acceleration in food, tobacco and alcohol prices (+5.9%), which I estimate was offset by larger declines in energy (-3.8%), fuel (-7.7%), as well as a moderation in the year-on-year rise in core inflation to 2.4% from 2.5% in February.
The softer growth in core inflation, reflecting both the base effect and a slight slowdown in the seasonally adjusted month-on-month core inflation rate to 0.23% m-o-m. This is, however, still above a pace consistent with the inflation target (0.17% m-o-m).
The CSO will provide details of March consumer price inflation on 10 April. If we see stronger March growth in non-energy administered prices (than my 0.6% m-o-m forecast), then core inflation could slow more in March on a m-o-m basis.
While Trump's reciprocal tariffs can be seen as a signal for further monetary easing, the still brisk growth in core inflation is likely to keep the CBN in a more hawkish position in the near term. This may pose a risk to its May interest rate cut to 3.5%. But there is still more data to come, see commentary here.
February's 0.4% month-on-month growth in retail sales excluding autos remained solid, albeit with a more modest recovery in the core segment (0.5%) after a 1.2% decline in the New Year. This was accompanied by a slight decline in services sales in February. The momentum over the past three months has been consistent with around 4-5% annualized growth in retail sales and points to still solid services sales growth of around 8%. February industrial and construction and foreign trade data are due out on April 7.
Retail sales return to pre-forecast levels
The momentum over the last three months is consistent with around 4-5% annualized growth in retail sales and points to still solid growth in services sales of around 8%
