South Africa’s annual inflation slowed more than expected in November, strengthening the case for an interest-rate cut early next year as the central bank shifts toward a lower inflation target.
Consumer prices rose 3.5% from a year earlier, down from 3.6% in October, Statistics South Africa said on Wednesday. On a monthly basis, prices fell 0.1%, compared with forecasts for no change. Only four of 11 economists surveyed had expected inflation to ease.
The reading moves inflation closer to the South African Reserve Bank’s new 3% target, formally adopted last month. It also follows data showing that inflation expectations two years ahead fell to 3.7% in the fourth quarter, the lowest level on record.
The combination of slowing inflation and easing expectations supports arguments for a rate cut at the central bank’s next policy meeting on January 29. The SARB has kept its benchmark rate unchanged at 8.25% since May, citing risks to price stability.
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Finance Minister Enoch Godongwana announced the shift to the lower inflation target in November, signaling a tighter long-term focus on price stability even as growth remains weak.
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Key Takeaways
November’s data adds momentum to expectations that South Africa is entering a lower-inflation phase after years of price pressure. Food inflation has eased, fuel costs remain contained, and the rand has been relatively stable, all helping to anchor prices. The move to a 3% target is a major policy shift. It aligns South Africa more closely with global peers and raises the bar for credibility at the central bank. Lower inflation expectations suggest households and firms are starting to believe the change. A rate cut in January would support an economy struggling with weak demand, high unemployment and limited fiscal space. However, policymakers are likely to proceed cautiously, mindful of risks from global interest rates, oil prices and capital flows. If inflation remains near current levels into early 2026, pressure will grow for a gradual easing cycle rather than a single cut, reshaping borrowing costs across the economy.