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Headline consumer inflation slows to 4,8%

───   OLEBOGENG MOTSE 15:38 Wed, 22 Nov 2017

Headline consumer inflation slows to 4,8% | News Article

Headline consumer inflation fell to 4,8% in October from 5,1% in September, exceeding expectations. Senior economic analyst at FNB, Jason Muscat, says the lower inflation rate should be encouraging to the South African consumer.


This decrease comes after two months of increases, from 4,6 % in July to 4,8 % in August, increasing again to 5,1 % in September. Muscat says the drivers behind the inflation decline is lower food inflation and smaller fuel price increases. “We saw a contraction of 3% in bread and cereal inflation. It seems that meat prices may have peaked at 15,5%. Another contributing factor is that petrol price increases came down from 12,2% in the previous month to around 10,8%,” says Muscat.

Despite lower inflation figures, Muscat predicts the Reserve Bank is likely to announce that interest rates will remain unchanged. The Reserve Bank’s Monetary Policy Committee has been meeting since yesterday and will announce their interest rate decision tomorrow. He says even though the inflation rate remains within the Reserve Bank’s target band of between 3% and 6%, the committee may want to hold back on an interest rate cut due to uncertainty in the country.

Credit rating agencies Moody’s, as well as S&P, are set to announce their decisions on South Africa’s credit ratings on Friday. Muscat says in addition to that, the country is also awaiting the outcome of the ANC’s elective congress. All of this creates uncertainty in the system and that is why he thinks the Reserve Bank will keep interest rates on hold tomorrow.


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