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Inflation Quickens To 7-Month High On Higher Fuel Prices

20 February 2020 – South Africa’s inflation rate rose to a seven-month high in January driven by higher fuel prices.

Consumer-price growth quickened to 4.5% from 4% in December, Statistics South Africa said Wednesday in a statement. The median estimate of 19 economists in a Bloomberg survey was 4.6%.

Key Insights

  • The increase is unlikely to put pressure on the central bank to pursue tight monetary policy as it sees the rate averaging 4.7% this year, before stabilizing at 4.5% from the third quarter of 2021. The monetary policy committee reduced its benchmark interest rate to the lowest level in four years in January and its quarterly projection model implies another cut of 25 basis points in fourth quarter of the year.
  • The rate has now been at or below the target’s midpoint, where the central bank prefers it, for 14 months. The January number extends the longest streak in 14 years of inflation being at or below 4.5%.
  • Inflation was driven by an increases fuel price in January. The cost of gasoline was 15% higher than in the same month last year.

Annual core inflation, which excludes the prices of food, non-alcoholic drinks, fuel and electricity, slowed to 3.7%, the lowest level since June 2011. Source (Fin24)