Reserve Bank has room to cut interest rates next week

South African inflation quickened at a slower pace than expected in December, providing room for policymakers to cut interest rates later this month.

Consumer prices rose 3% from a year earlier, compared with 2.9% in the prior month, Pretoria-based Statistics South Africa said on Wednesday in a statement on its website.

That was less than the 3.2% median of 15 economists’ estimates in a Bloomberg survey.

The data comes a week before South African monetary policymakers meet to discuss their latest interest-rate stance and amid concerns about the outlook for global inflation.

Reserve Bank Governor Lesetja Kganyago said this week that policies being enacted by US President Donald Trump may be inflationary and derail future policy easing.

“To the extent that the measures taken are inflationary, it could slow down the disinflation process that central banks had so steadfastly worked on since the great inflation of 2022,” Kganyago said.

There is a risk that “the reduction in the restrictiveness of monetary policy that we had seen over the past year could then be brought to an abrupt halt,” he said.

Economists expect the MPC to lower the benchmark interest rate by 25 basis points for a third consecutive meeting at its Jan. 30 meeting.