Inflation Rate Drops To Its Lowest In 9 Years In South Africa

The latest inflation figures from South Africa are out and it can be said that the numbers are even better than expected.

According to the latest data from the country’s statistics agency, Statistics South Africa, the annual inflation rate in Africa’s most-developed economy dropped in October, even lower than forecasted figures to its lowest in almost nine years. This should give a bit of wriggle room for the apex bank to relax policy.

The inflation data for October have it that consumer-price growth slowed to 3.7 percent compared with 4.1 percent in September The latest submission marks 31 consecutive months in which inflation has remained within the central bank’s target band of 3 percent to 6 pecent.

Annual core inflation, which excludes the prices of food, non-alcoholic drinks, fuel and electricity, was unchanged at 4 percent.

The significant drop in inflation may give the central bank some room to trim its benchmark interest rate on Thursday. In September, the Reserve Bank’s quarterly projection model showed the repurchase rate staying at 6.5 percent for the rest of the year.

But the Monetary Policy Committee (MPC), at the time, also projected inflation will peak at 5.3 percent in the first quarter, which is well above the preferred 4.5 percent.

There have been calls for the MPC to ease policy to boost an economy that is expected to grow by just 0.5 percent this year. Its modelling shows a 25 basis-point cut point will only provide a 0.1 percentage point boost to economic growth next year.

Earlier this week, Africa’s largest economy, Nigeria, recorded an inflation surge that is unlike anything seen in the last 17 months, no thanks to food prices which have skyrocketed since Nigeria closed its land borders against imports/exports.