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South Africa's main inflation gauges came in below forecast yesterday, but the jury is still out on whether the central bank will hold off raising interest rates further as it grapples with runaway consumer spending.
Statistics South Africa said the targeted CPIX inflation rate rose by a lower-than-expected and unchanged 5percent in the year to November. Headline CPI was also flat at 5,4percent, reflecting mainly a cut in retail fuel prices.
On a monthly basis, the CPIX decelerated by 0,1 percent, as did headline CPI inflation.
"The better-than-expected CPIX reduces our forecast CPIX inflation figures for the first quarter of next year, making it unlikely that the [Reserve Bank's] inflation target will be missed," said Investec analyst Annabel Bishop.
"We continue to forecast flat interest rates for most of next year, with the possibility of a 50-basis-point cut at the October meeting of the monetary policy committee."
A Reuters poll had predicted that CPIX would rise by 5,2percent year-on-year and by 0,2percent month-on-month. CPI was forecast at 5,7percent year-on- year and up 0,2 percent on the month.
This would have raised the likelihood of another rise in the central bank's key repo rate, which it has already hiked by 200 basis points to 9percent in four stages since June.
But some analysts believe the authorities might announce a further rate increase in February in a bid to keep the CPIX within its targeted range of 3percent to 6percent.
Central bank governor Tito Mboweni said this month that the main indicator was set to breach the top of the range in April, before declining.
"Today's better-than-expected inflation report might lead many to argue that rates have peaked, but we remain sceptical," said Adenaan Hardien, chief economist at Africa Harvest.
"Today's release is more a reflection of a dearth of price surveys in the November CPI report."