Speaking after the release of the figures, SEIFSA Economist Tafadzwa Chibanguza said that a further moderation into the inflation target band gave room for a more gradual policy response from policy makers.
The CPI increased by an annual rate of 5.8% in November 2014, down from the annual 5.9% recorded in October 2014. The source of the moderation, in terms of contribution to the annual increase, was the transport sub-component of the index, which is the only sub-component that decreased. The other sub-components remained unchanged.
“On average between October and November this year prices remained unchanged, resulting from the fact that we are beginning to observe upward pressure in the food and beverages sub-component of the index, which offset the transport decreases,” Mr Chibanguza said.
He added that while further easing in the CPI was expected to be assisted by falling brent crude prices, not much should be read into today’s figures since November was usually a low-survey month for Statistics South Africa.
Mr Chibanguza said that the CPI profile was likely to continue to be dictated largely by two important variables: brent crude oil prices and the exchange value of the rand.
“The current dynamics playing out in the brent crude oil market are expected to persist for a while longer. This week alone the price of brent crude has continued to test fresh multi-year lows in the US$65/bbl region. The longer these current levels persist, the better for the South African inflation profile,” said Mr Chibanguza.
However, the rand posed upward risk to inflation. In the past few days it has slid significantly to touch a post-crisis high of $1/R11.57, in response to both global and domestic data releases.
“This certainly does not paint a good picture for the inflation profile, especially with the general consensus that $1/R12 may now be an option before the end of this year and an even greater probability when the United States Federal Reserve begins to increase its interest rate,” said Mr Chibanguza.
Improving data releases from the United States, such as upward revision of the United States GDP growth and successively good payroll figures, only serve to bring the first interest rate increase out of the US closer than previously anticipated.