S. Africa records lowest inflation in 16 years

South Africa’s annual Consumer Price Index (CPI) for 2020 was at 3.3 per cent, the lowest inflation recorded since 2004, Statistics South Africa (Stats SA) said on Wednesday.

The Stats SA attributed food and non-alcoholic beverages as the main drivers of inflation in December with a monthly increase of 0.5 per cent and an annual rise of 6.0 per cent.

This was up from November’s annual reading of 5.8 per cent.

“Meat prices rose by 7.3 per cent from a year ago and by 1.2 per cent from November.

Stewing beef was 2.9 per cent more expensive than it was in November 2020 and 12.4 per cent more expensive than in December 2019,” data showed.

Prices in the oils and fats category climbed by 10.2 per cent over 12 months and by 1.6 per cent over one month. Cooking oil prices increased by 11.3 per cent since December 2019 and by 2.9 per cent between November 2020 and December 2020.

With the Reserve Bank set to announce its decision on interest rate on Thursday this week, it’s unclear if the low inflation would sway the monetary policy committee’s final decision.

“The Reserve bank looks at future inflation.

“So if inflation is low and supported and is expected to stay low, it might have a bearing on the Reserve Bank decision.

“However if there’s an expectation that inflation will accelerate in months to come, they will not change the interest rate,” Jannie Rossouw, Head of School of Economic and Business Sciences at the University of the Witwatersrand, said.