South Africa’s Inflation Rate Falls for Third Month
South African inflation slowed for a third consecutive month in November, easing to an annual 12.1 percent and adding to speculation the central bank will shave as much as 3 percentage points of its key interest rate next year.
The CPIX inflation rate, which excludes mortgage costs, fell from 12.4 percent in October, Pretoria-based Statistics South Africa said on its Web site today. Inflation was expected to slow to 11.8 percent, according to the median estimate of 17 economists surveyed by Bloomberg. Prices rose 0.2 percent in the month.
The Reserve Bank cut its benchmark interest rate by half a percentage point to 11.5 percent on Dec. 11, the first reduction in more than three years, as economic growth slumped to a decade low and oil prices plunged. Inflation will probably ease into the bank’s 3 percent to 6 percent target range by the third quarter of next year, Governor Tito Mboweni.
“Even though today’s number is higher than expected, it doesn’t change our view that interest rates will come down,” said Carmen Altenkirch, an economist at Nedbank Group Ltd., South Africa’s fourth-largest bank. “Inflation is going to be a lot lower next year. We expect interest rate cuts of 300 basis points.”
The rand was at 9.945 against the dollar as of 1:20 p.m. in Johannesburg from 9.9551 before the data was released. The yield on the R153 government bond, due 2010, dropped 31 basis points to 7.2 percent.
Global Recession
A recession in the U.S., the euro region and Japan and falling commodity prices are slowing inflation worldwide wired payday loan. The U.S. Federal Reserve cut its main interest rate to as low as zero yesterday for the first time.
“All scenario exercises that we went through show inflation is going to radically come down,” Mboweni said on Dec. 11. The rand “remains the most significant upside risk to the inflation outlook.”
The central bank will begin targeting the headline inflation rate from next year, after the statistics office makes changes to the way it measures the housing category in the consumer price index. The weighting of food will be reduced, possibly cutting the inflation rate, the statistics office said on July 1. The changes will be applied to the January inflation data, which is published in February.
Headline inflation, which includes mortgage costs, slowed to 11.8 percent last month from 12.1 percent in October, the statistics office said today. The core inflation rate, which excludes mortgage interest and some food items, dropped to 12.6 percent from 13.1 percent.
Oil has dropped 61 percent in New York since Sept. 1, prompting the government to cut gasoline prices by 18 percent on Dec. 3, even as the rand weakened.
A slump in economic growth may also help to ease price pressures. Six interest rate increases since June last year slashed consumer spending, while exports waned, slowing annualized economic growth to 0.2 percent in the third quarter from 5.1 percent in the previous three months.