South African inflation drops sharply, paving way for more rate cuts
Adds economist comments in paragraphs 5 and 8, more context throughout
JOHANNESBURG, Oct 23 (Reuters) -South Africa's inflation dropped sharply in September, hitting its lowest level in more than three years and bolstering expectations for another interest rate cut by the central bank next month.
Annual consumer price inflation slowed to3.8% from 4.4% in August ZACPIY=ECI, Statistics South Africa data showed.
Economists polled by Reuters had forecast inflation would drop to3.9%, well below 4.5% - the mid-point of the South African Reserve Bank's 3%-6% target range.
The Consumer Price Index (CPI) rose0.1% month-on-month in September, the same as a month before ZACPI=ECI.
"Inflation is well under control in South Africa, this is really the start of a period of about 6 months in which the headline CPI should be below 4%," said independent economist Elize Kruger.
The central bank struck a measured tone at its September meeting when it trimmed its main interest rate by 25 basis points to 8%, saying there were still risks on the horizon.
Analysts expect the bank to continue easing policy in quarter point increments, taking the repo rate ZAREPO=ECI to 7% by the middle of next year.
"Larger 50 bps moves are unlikely, in our view," Standard Chartered's Razia Khan said in a research note. "We think the SARB will want to proceed cautiously, monitoring global risks and any consumption boost from South Africa's recent Two Pot Pension Reforms, which allow earlier pension withdrawals," she said.
Reporting by Bhargav Acharya, Kopano Gumbi and Tannur Anders
Editing by Alexander Winning and Tomasz Janowski
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
