Pretoria - The Consumer Price Index (CPI) for March fell to 5.1 percent in line with market expectations.
"This rate was 0.6 of a percentage point lower than the corresponding annual rate of 5.7 percent in February 2010," Statistics South Africa (Stats SA) said on Wednesday.
Market consensus was that CPI would fall to 5.1 percent.
"The reasons for the slowing down of inflation are the further moderation of food inflation and prices in durable and semi goods because of a combination of the Rand strength as well as weak domestic demand," Nedbank said earlier this week.
According to Stats SA the food and non-alcoholic beverages index decreased, while the housing and utilities index increased.
In its commentary, Standard Bank said the outlook on inflation remained constructive, with the disinflationary trend likely to endure to June.
"While the inflation trajectory remains mildly upward sloping from Q3 onwards, the general slack in the economy, weak credit growth, a slow asset price recovery, relative rand strength and contained input cost increases, baring electricity tariffs, point to a limited potential for inflation to exceed the upper target ceiling over the medium term," said the bank.
Standard Bank said even though today's data was better than expected this does not necessarily translate into further easing of the repo rate.
"We believe that inflation expectations will have to drop by a considerable margin, say a further 0.3 to 0.5 percentage points, before another rate cut will be reconsidered. In a similar vein, Q2 economic data will have to disappoint to bring about the same decision.
"This is ascribed to the fact that the relative weakness in household demand, credit growth and asset markets have already been factored in to the latest interest rate prognosis," the bank said.
Standard Bank expects the first interest rate hike in March next year.
