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Inflation at a 7 month low

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South Africa’s annual inflation rate eased to 4.5 percent year-on-year in December.

SAs annual inflation rate eased to 4.5 percent year-on-year in December from 5.2 percent in November as prices for fuel and food slowed in the period. Picture: CHRIS RATCLIFFE, BLOOMBERG, 2012 BLOOMBERG FINANCE LP
JOHANNESBURG – South Africa’s annual inflation rate eased to 4.5 percent year-on-year in December from 5.2 percent in November as prices for fuel and food slowed in the period.  

December’s inflation print was also the lowest inflation rate in seven months.

Statistics South Africa says annual core inflation rate, which excludes cost of food, non-alcoholic beverages, fuel and energy, stood at 4.4 percent, unchanged from December’s data.

The South African Reserve Bank (SARB) last week abandoned its previous hawkish rhetoric suggesting that further rate hikes are now unlikely.

Capital Economics economist John Ashbourne says that attention will soon focus on the possibility of rate cuts.

“With inflation well within target and economic growth weak, we think that the next move will be a cut. We’d already pencilled in a 25 basis point cut in 2020, by which time the US policymakers will be easing policy,” Ashbourne says.

The SARB is of a view that the near-term inflation forecast generated by the SARB’s Quarterly Projection Model has improved significantly since the previous Monetary Policy Committee. Headline inflation is now expected to average 4.8 percent in 2019 down from 5.5 percent previously, before increasing to 5.3 percent in 2020 down from 5.4 percent and moderating to 4.8 percent in 2021.

– BUSINESS REPORT ONLINE