Annual consumer price inflation edged higher in December to 3.0% from the 2.9% print in October, beating market expectations.
The data comes a week before monetary policymakers meet to discuss the latest interest-rate outlook and setting. The market expects the monetary policy committee to lower the benchmark interest rate by 25 basis points at its January meeting.
The main contributors to the annual inflation rate were housing and utilities, and miscellaneous goods and services. Furthermore, the average annual consumer price inflation was 4.4% in 2024. This was 1.6 percentage points lower than the corresponding average of 6.0% in 2023. Risks to the central bank’s inflation outlook include higher domestic energy prices and weaker rand. Still, a good crop output may have a dampening effect on food prices providing easing price pressures.
Since Trump won the US election in November the rand, a bellwether for emerging market currencies, has depreciated against the dollar. Its weakness has been tied to a global pullback from emerging markets fuelled by potential US tariffs and reduced expectations for the Federal Reserve interest rate cuts. Subsequently, global inflation and geopolitical uncertainties could lead the monetary policy committee to adopt a similar stance.
A move by the SARB to leave its policy rate unchanged is likely amid concerns about the outlook for global inflation and policies being enacted by the US that may inflationary. The South African Reserve Bank Governor warned that extent that measures taken are inflationary, it could slow down the disinflation process that central banks had worked over the last few years. As such, the easing monetary policy that we have see over the past year could then be brought to a halt.
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