adminJOHANNESBURG — South Africa’s inflation rate fell to 5,8 percent in November, staying inside the central bank’s target band for a third month and giving it room to keep interest rates unchanged.
Inflation slowed from 5,9 percent in October, the Pretoria-based statistics office said on its website yesterday. Last month’s inflation rate matched the median estimate of 22 economists surveyed by Bloomberg. Prices were unchanged in the month.
The price of Brent crude oil has dropped by about 40 percent since reaching a nine-month high on June 19, helping to contain inflation even as the rand weakened by more than 6 percent against the dollar in the same period.
The Reserve Bank left its benchmark repurchase rate unchanged at 5,75 percent last month and cut its inflation forecasts.
The slowdown in inflation “could postpone the decision to raise interest rates,” Lullu Krugel, an economist at KPMG LLP, said by phone from Johannesburg yesterday. “A further weakening in the rand could erode some of the positives from the lower oil price.”
Transport costs, which contribute 16 percent to the consumer price index, rose 4,2 percent in November, down from 4,8 percent in the previous month, the statistics office said. The government lowered fuel prices by 3,3 percent in November.
Policy makers have room to adjust monetary policy gradually, the central bank said on December 1. The bank is forecasting inflation will ease to an average of 5,3 percent next year.
Retail (SARSCONY) sales expanded 3,4 percent in October compared with a year ago, the fastest growth since January, according to a separate report from the statistics office yesterday. Sales increased 0,4 percent in the month.
The rand fell 0,5 percent to 11.5065 per dollar as of 1:13 pm in Johannesburg. The yield on government bonds due in December 2026 rose nine basis points to 7,9 percent.
The core inflation rate, which excludes food, non-alcoholic beverages, fuel and electricity costs, rose to 5.8 percent in November from 5,7 percent in the previous month.
Meanwhile, the rand was steady at firmer levels yesterday morning as the dollar lost ground against a basket of major currencies.
Investors cashed in profits from the greenback after its recent strong run, which saw it hitting its highest level in eight years on Friday following a strong US jobs report.
At 8.30am the rand was at 11,4289 to the dollar from Tuesday’s close of 11,4266. The local unit had begun Tuesday trading at 11,5533 to the greenback.
Against the euro‚ the local unit traded at 14,1620 from 14,1589 previously and was at 17,9290 against the pound from 17,9230.
The euro was at $1,2393 from $1,2387 previously. Barclays Research said in an early morning note that traders would be watching local inflation data due later in the morning.
Statistics SA will release consumer price index (CPI) figures at 10am. Inflation is expected to have slowed to 5,8 percent year on year in November from 5,9 percent in October, according to a BDpro median consensus forecast from eight economists. The moderation would be supported by lower oil and food prices.
This would be the third consecutive month that inflation has remained within the 3 percent-6 percent target band and it is likely to remain there as long as oil prices remain around $69 a barrel and the rand does not weaken significantly in coming months.
A benign inflation outlook will help the Reserve Bank keep to its gradual interest-rate increasing cycle. Interest rates may even be kept on hold until the second half of next year after rising a cumulative 75 basis points this year.
Unchanged interest rates would give over-indebted consumers time to pay off their debts or at least bring their debt levels down to more sustainable -levels. — Bloomberg/BDlive.
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Bongani Ndlovu