South Africa’s inflation slows

South African inflation decelerated for a second straight month, a slowdown that’s unlikely to sway the central bank from raising interest rates in November to stabilize and lower price growth.

The headline consumer-price index rose 7.5% from a year earlier, compared with 7.6% in August, Pretoria-based Statistics South Africa said Wednesday in a statement on its website.

That was less than the 7.6% median of 13 estimates in a Bloomberg survey of economists.

Absa highlighted that the deceleration in headline CPI is mainly due to further easing in fuel inflation to 34.0% year-on-year in September from 43.2% in August.

Despite the lower inflation, the South African Reserve Bank (SARB) is still expected to significantly raise interest rates in the coming months.

The latest Thomson Reuters Econometer poll shows that analysts are hawkish on the interest rate outlook for South Africa.

The results show the consensus repo rate forecast at 6.75% in Q4 2022 compared with 6.50% in the September poll.

Moreover, analysts expect interest rates to peak at 7.25% in Q1 2023, 0.5% higher than in the previous poll.

Absa shares the view that there will be more aggressive interest rate hikes, predicting a repo peak of 7.50% in January.

Absa believes the South African Reserve Bank’s (SARB’s) Monetary Policy Review (MPR) will likely start cutting rates from early Q4 2023. Consensus forecasts see cuts starting in Q1 2024.