CPI rises to 4% in December

After a record low in November 2019, the Consumer Price Inflation (CPI) has risen to 4% in December 2019. Statistics South Africa on Wednesday released the Consumer Price Index which highlighted that the price inflation was 4,0% in December 2019, up from 3,6% in November 2019.

The inflation rate rise was largely due to an increase in food and non-alcoholic beverages. The increase of 3,9% year-on-year on these beverages contributed 0,7% point to the total CPI annual rate.

Although this is a slight increase from November, the data shows a 0.5% decrease when compared to the same period in 2018. The 4,0% index for December 2019 shows a slight increase when compared to the same period at the beginning of the decade when CPI was sitting at 3,5%.

The release of the CPI comes on the back of the Reserve Bank’s Monetary Policy Committee decision to cut the repo rate by 25 basis points last week.  The decision was largely seen by many sectors as a way of providing a stimulus to the struggling economy, this as Reserve Bank Governor Lesetja Kganyago announced that the committee has lowered its inflation forecasts significantly.

The South African Reserve Bank (SARB) cited weak economic growth as the reason why inflation remained under control.

SARB painted a grim picture on the outlook for economic growth, lowering its predictions for this year and next to 1.2% and 1.6% respectively. The forecast for inflation was now seen at 4.7% in 2020 and 4.6% in 2021, compared to the previous forecast of 5.1% and 4.7% respectively.

Inflation, as measured by the annual change in CPI, is the key measure used by the Reserve Bank’s monetary policy committee to set interest rates.