The inflation rate for November was 0.1% down from the 3.6% of October, but meat and other food prices are keeping it above the new inflation target of 3%.
Consumer price inflation came in slightly lower than expected in November, easing to 3.5% from 3.6% the month before. The latest reading supports the view that the country’s inflation trajectory has undergone a downward adjustment, Jacques Nel, head of Africa Macro at Oxford Economics Africa said.
“The outcome of 3.5% was slightly lower than the consensus expectation of 3.6%. Inflation decreased by 0.1% in November after ticking up 0.1% the month before. Another downward inflation surprise, although marginally, will be welcomed across the board.” he said.
“The latest inflation survey shows that expectations improved markedly since the third quarter with analysts forecasting inflation to average close to 3.5% over the next two years, while trade unions see inflation averaging 3.9% and business managers expect inflation to hover around 4%.”
Overall, he says, inflation expectations for 2026 and 2027 decreased by about 0.4% per year. “The latest print will support the view that the inflation trajectory has undergone a downward adjustment.”
ALSO READ: Stronger rand expected in December, but did we expect R16.72/$?
PPS Investments: 50% probability of a repo rate cut in January
Mark Phillips, head of portfolio management and analytics at PPS Investments, says the slight moderation was due to prices increasing by 3.5% and a marginal decline from the 3.6% annual increase reported in the previous month.
“The most significant contributors to the annual inflation rate were the housing and utilities sector, alongside food and non-alcoholic beverages. Both sectors sustained upward pressure on overall price levels.”
According to a Reuters poll, economists anticipated that annual inflation would remain steady at 3.6% for November, unchanged from the October figure. The actual data, Phillips says, therefore came in marginally below expectations.
A survey by the Bureau for Economic Research (BER), shows that South Africa’s inflation expectations for the next two years fell to 3.7%, a development considered favourable ahead of the forthcoming interest rate decision next month.
The South African Reserve Bank (Sarb) seeks to anchor expectations around the recently established 3% inflation target, Phillips says.
“The Sarb attributed the improvement in inflation expectations to the introduction of the new 3% target, noting that this policy adjustment was instrumental in steering expectations lower across the economy.
“The recent decline in inflation expectations may afford policymakers increased flexibility in setting monetary policy. Currently, forward rate agreements imply a 50% probability of an interest rate cut at the next month’s meeting. During the current year, the central bank already reduced interest rates by 100 basis points.”
ALSO READ: SA’s economic resilience sets the stage, but 2026 risks remain – economist and IMF
Momentum: SA remains on rate-cutting path as inflation moderates
Sanisha Packirisamy, chief economist at Momentum Investments, also notes that inflation for November beat the Reuters median consensus, while core inflation was in line with expectations. “Doubts about the feasibility of the announced national rollout of vaccines to combat foot-and-mouth disease leave the red-meat and dairy industries exposed to risk.”
She also points out that Brent crude oil dipped below US$60/bbl on Tuesday on optimism around a potential Russia-Ukraine peace deal, while the rand dipped below R17/US$.
“The moderation in November’s inflation, along with a notable decline in inflation expectations, especially among price-setting agents, supports our view that South Africa remains on an interest-rate cutting path.
“However, with expectations still above the 3% target (3.8% for 2026 and 3.7% for 2027), the Sarb caution over cutting rates too soon before inflation is firmly anchored and the lagged effects of prior rate cuts, we expect the repo rate to be maintained at 6.75% at the January 2026 meeting, although a cut remains possible.
“We anticipate two 25-basis points cuts during 2026 and forecast inflation at 3.3% for 2025, 3.5% for 2026 and 3.3% for 2027, lower than the BER’s inflation expectations.”
About the Author
