South African inflation eases, economists see more rate cuts ahead

Source: Reuters/Siphiwe Sibeko

Headline consumer inflation slowed to 3.5% year on year in November from 3.6% in October, within the 1 percentage point tolerance band of the 3% target announced last month.

Economists polled by Reuters had predicted that inflation would remain unchanged at 3.6% last month.

A breakdown by Statistics South Africa showed categories like transport and recreation recorded cooler rates in November, but others like food and restaurants saw increases.

Annual core inflation, which strips out volatile items like food and energy, came in at 3.2% in November.

"The softer-than-expected South African headline inflation reading and weak core inflation will give the Reserve Bank plenty of confidence that it can meet its new, lower 3% inflation target," William Jackson, chief emerging markets economist at Capital Economics, said in a research note.

"We expect 100 basis points of cuts in the repo rate in 2026," Jackson added.

At last month's rate-setting meeting the South African Reserve Bank lowered its main lending rate by 25 basis points to 6.75%, citing an improved inflation outlook.

Since then a quarterly survey commissioned by the Reserve Bank showed business people, trade union officials and analysts expect much lower inflation levels under the new target.

The Reserve Bank's next interest rate announcement is scheduled for 29 January 2026.