Inflation eased to 5.7% in January, down from 5.9% the month prior — which was a hair’s breadth away from the ceiling of the South African Reserve Bank’s target range of 3% to 6%, it was announced on Wednesday.
According to Statistics South Africa, the main contributors to the 5.7% annual inflation rate were food and non-alcoholic beverages, housing and utilities, transport and miscellaneous goods and services.
The 5.9% annual increase in December was the highest since March 2017, when the rate was 6.1%. The January slowdown in inflation was helped by lower fuel prices.
South Africa’s inflation numbers come as advanced economies post record figures, which have served as further proof that elevated prices are a stubborn feature of the recovery from the Covid-induced economic slump.
Last week, the Bureau of Labour Statistics revealed that inflation in the US had climbed higher than expected to 7.5% in January — the highest levels in four decades. Inflation in the UK also bucked expectations, rising to 5.5% in January. The UK inflation rate was the highest recorded in three decades.
Elevated inflation, which central banks have said will be transitory, is the result of Covid-related supply bottlenecks.
With little indication that inflation will subside in advanced economies, policymakers have been forced to react by rolling back monetary stimulus. The US Federal Reserve’s seemingly more hawkish stance on inflation has stoked fears that it will roll back monetary policies that have been highly supportive of global economic growth.
The South African Reserve Bank pre-empted any move by the Fed by already raising rates in November last year. In January the Reserve Bank lifted the repo rate — which affects the cost of borrowing — for a second time, raising it to 4%.
In its January statement, the Reserve Bank’s monetary policy committee flagged high global inflation, and faster interest rate normalisation, as a risk to the economy.
“The risks to the inflation outlook are assessed to the upside. Global producer price and food price inflation continued to surprise higher in recent months and could do so again,” the statement read.
“Oil prices increased strongly through 2021 and are up sharply year to date. Current oil prices sit well above forecasted levels for this year. Electricity and other administered prices continue to present short- and medium-term risks.”
Fuel prices eased in January, but this relief was temporary. This month saw a hike in the cost of petrol, diesel and illuminating paraffin, which will likely reflect in February’s inflation figures.