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HomeBusinessS/Africa Inflation Drops To Its Lowest In Over 4 Years

S/Africa Inflation Drops To Its Lowest In Over 4 Years

News Investigators/ Statistics South Africa on Wednesday said South Africa’s inflation rate dropped in October to its lowest level since the peak of the COVID pandemic.

Statistics South Africa said falling fuel prices were the primary driver of the slowdown in annual inflation to 2.8 per cent from 3.8 per cent in September (ZACPIY=ECI), opening a new tab, with slowing food inflation as another important factor.

October’s reading is the lowest inflation has been since June 2020, when South Africans were subject to one of the harshest COVID lockdowns worldwide. Inflation has only been below 3 per cent in a handful of months in the past two decades.

Independent economist Elize Kruger said fuel and food price developments play a greater role in October when there are typically fewer changes in the prices of other items.

South Africa’s government-regulated petrol and diesel prices fell by more than one rand a litre in October.

Economists polled by Reuters had forecast inflation to slow to 3.1 per cent, well below the 4.5 per cent level the South African Reserve Bank aims for, but within its 3 per cent-6 per cent target range.

In August South Africa’s headline inflation fell below the midpoint of the central bank’s target range of between 3per cent to 6per cent for the first time since April 2021

In August South Africa’s headline inflation fell below the midpoint of the central bank’s target range of between 3 per cent to 6 per cent for the first time since April 2021

South Africa’s central bank will announce its next interest rate decision on Thursday.

In a Reuters poll published last week, all 22 economists surveyed predicted the bank would lower its repo rate (ZAREPO=ECI), opening a new tab. Twenty of the 22 predicted 25 basis points (bps) cut and two a 50bps reduction.

Several economists said on Wednesday that they were still expecting a 25bps cut, the same size of reduction as in September when the central bank cut rates for the first time in more than four years.

Johann Els, chief economist at Old Mutual, argued Wednesday’s data showed there was now very little inflationary pressure in the South African economy and the central bank should opt for a 50bps cut.

One reason a bigger cut is not widely expected on Thursday is a recent bout of rand weakness in the wake of Donald Trump’s U.S. election victory.

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