Statistics SA said CPIX inflation decelerated to 12,4% year-on-year last month from 13,0% the previous month, slightly below forecasts, while the all-items consumer price index (CPI) increased by 12,1% compared to 13,1% previously. On a monthly basis, CPIX was at 0,2% in October, while headline CPI was steady. A Reuters poll of 18 economists forecast CPIX would slow to 12,5% year-on-year and quicken slightly to 0,3% month-on-month.
?This confirms that inflation is on a nice downward track, in fact in the coming two months we are likely to see a big reduction due to the lower fuel prices and the re-weighting and re-basing early next year,? said Adenaan Hardien, chief economist at Cadiz African Harvest. CPIX - which strips out mortgage costs from consumer inflation - has remained above the upper end of the Reserve Bank?s 3-6% band since first breaching it in April last year. The Bank?s monetary policy committee (MPC) has lifted its repo rate by a total of five percentage points to 12,0% since June 2006 to try and rein in inflation, but left rates unchanged in August and October. Most analysts see rate cuts starting in early next year, or even before that, at the MPC?s meeting next meeting on December 10/11.
?Inflation has improved materially notwithstanding the weaker currency and this bolsters the chances of an early rate cut. I would say there is a fairly good chance of a rate cut in December of about 50 basis points,? said Hardien. The rand, battered this year by a global financial crisis that has kept investors risk averse, was firmer at R9,87 versus the dollar at 0958 GMT compared with R9,90 before the data was issued this morning. The yield on the benchmark 2015 bond was at 8,06% from 8,05%.