In November, South Africa’s headline CPI rose marginally to 2.9% y/y from 2.8% in October, remaining below the SARB’s target band of 3% to 6% for the second consecutive month. This slower-than-anticipated acceleration, influenced by easing food price inflation and a reduced drag from fuel prices, creates room for the central bank to consider interest rate cuts. However, calls to lower the SARB’s inflation target and concerns about moving too quickly could lead to a more cautious approach.

Retail sales data for October, meanwhile, surprised on the upside with a 6.3% y/y increase, signalling robust consumer demand and reducing the need for monetary easing. Looking ahead, inflation is expected to tick higher from a lower base, but the SARB is likely to remain measured in its policy adjustments to support growth while preserving inflation stability.

Looking externally, US CPI inflation increased in November, raising concerns that progress toward the Fed’s 2% target has stalled. Of particular note was that the annualised monthly inflation rate exceeded 3%. This is likely to keep the Fed cautious as it cuts interest rates in the coming months. However, a positive development was the slower pace of rent inflation, which came in at the lowest in nearly 3.5 years. This offered some hope for easing inflationary pressures in stickier components, which will be welcome news at the Fed.