South African inflation slows to 5.3%, easing rate pressure

By Rene Vollgraaff, Bloomberg

21 Jan, 2015 – South Africa's inflation  rate fell to 5.3 percent in December, the lowest in more than a year, giving the Reserve Bank room to keep interest rates unchanged.

Inflation slowed from 5.8 percent in November, the Pretoria-based statistics office said on its website on Wednesday. The median estimate of 23 economists surveyed by Bloomberg was 5.5 percent. Prices fell 0.2 percent in the month.

The price of Brent crude oil has dropped by almost 60 percent since reaching a nine-month high on June 19, helping to contain inflation even as the rand weakened by more than 7 percent against the dollar over the same period. The central bank, which targets inflation at 3 percent to 6 percent, left its benchmark repurchase rate unchanged at 5.75 percent in November and will review borrowing costs again on Jan. 29.

The lower inflation rate "is not only a big boost to consumer finances, but will also help to take pressure off the Reserve Bank," Johann Els, an economist at Old Mutual Investment Group in Cape Town, said in an e-mailed note before the data was released. "It is unlikely that the Reserve Bank will hike rates over the next few months."

The core inflation rate, which excludes food, non-alcoholic beverages, gasoline and electricity costs, fell to 5.7 percent in December from 5.8 percent in the previous month.-Bloomberg