The Reserve Bank Treads with Caution as Credit Ratings and The ANC Elective Conference Approach

SOUTH AFRICA - Report 23 Nov 2017 by Iraj Abedian

The South African Reserve Bank’s Governor Lesetja Kganyago has announced that the Bank will be keeping the country’s repo rate at 6.75%, and hence the prime interest rate also remains at 10.25%.

Headline CPI receded to 4.8% y/y in October 2017 (the same rate recorded in August 2017) following a slight uptick to 5.1% y/y in September (and the monthly inflation rate also decelerated from 0.5% m/m in September to 0.3% m/m in October). Hence, South Africa’s inflation rate has been within the Reserve Bank’s target range (3-6%) since April 2017, i.e. for seven consecutive months. See graph 1. This development was due to a deceleration in the prices of 75% of the sub-categories during October even though prices increased in 11 out of the 12 sub-categories.

Food price inflation continued to slow down from 5.4% y/y in September 2017 to 5.3% y/y in October. Moreover, meat prices, the only food item that had been experiencing accelerating inflation since drought effects started dissipating from the beginning of the year, (although still relatively high) finally decelerated for the first time during 2017, recording 15.5% y/y in October from 15.6% y/y in September.

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