South African inflation slowed for the second straight month in September, to the bottom of the central bank’s target range.
Consumer prices rose 3% from a year earlier, compared with 3.1% in August, Pretoria-based Statistics South Africa said Wednesday in a statement on its website. It matched the median estimate of 15 economists in a Bloomberg survey. Prices rose 0.2% in the month, in line with a median estimate of nine economists.
- The drop may provide some room for the central bank to ease policy further in November, if the outlook for the economy continues to deteriorate. The monetary policy committee kept its key interest rate at 3.5% last month after 300 basis points of easing and said inflation will remain close to the 4.5% midpoint of its target range in 2021 and 2022.
- “While the initial Covid-19 shock clearly justified a forceful response,” policy is once again more data dependent with the rate either cut by smaller increments or left unchanged in the second half of the year, the Reserve Bank said this month in its biannual Monetary Policy Review.
- Core inflation, which excludes the prices of food, non-alcoholic drinks, fuel and electricity, was unchanged at 3.3%.
- Further easing of restrictions in August meant that September was the first full month that alcohol and tobacco were on sale this year since a strict nationwide lockdown started March 27.
Nedbank’s Group Economic Unit expects inflation to remain around 3% for the remainder of the year and to average around 3.3% this year.
“This benign inflation outlook as well as poor growth prospects suggest there is room for further monetary easing by the Reserve Bank. However, the Reserve Bank, which kept rates on the hold at their last meeting, signalled that monetary policy has done as much as it can for the recovery and that structural changes are needed to put the South African economy a better footing. Our view is that the Bank will keep rates on hold for the remainder of the year and into next year,” it said.