SA’s CPI comes in higher than the market expected

Statistics South Africa has released the consumer price index (CPI) for December, which rose to 5.9 percent year-on-year, compared with 5.5 percent in November.

On a month-on-month basis, December’s CPI was also higher at 0.6 percent, compared with 0.5 percent in November.

The South African Reserve Bank has an inflation target range of 3 to 6 percent.

Interest rates

Earlier this week, economists said the Reserve Bank is likely to increase interest rates during its Monetary Policy Committee meeting next week.

The South African Reserve Bank uses inflation targeting to protect the value of the rand.

The Reserve Bank indicated last year that we are likely to see at least three interest rate hikes this year, given the acceleration in inflation both locally and globally.

“We expect inflation to rise higher at 5.7 % from 5.5% in November, that will push inflation rate for the year as a whole to 4.5 % although 4.5 % is right in the middle of the Reserves Bank 3 to 6 % target range. The Reserve Bank is more concerned about the inflation outlook and the monthly inflation rates. The Reserve Bank is likely to increase interest rates further when it meets next week,” said Nedbank Economist Isaac Meshego.