South African inflation dips to 9,5 per cent

JOHANNESBURG – Inflation in South Africa slowed for the fourth month in a row, easing to 9,5 per cent in December due mainly to a sharp drop in fuel prices, the national statistics agency said yesterday.

The consumer price index (CPI) was 2,3 points lower than the 11,8 per cent recorded in November, Statistics SA said in a statement. For the year, the average annual inflation rate for 2008 was 11,5 percent, the agency added.The improved figure last month came as fuel and transport prices eased considerably. The CPI for transport decreased to 2,2 per cent in December, from 14,5 per cent the month before.Food prices continued to climb sharply, rising 17,1 percent in December, compared to 16,6 percent in November.But the latest report raised hopes that South Africa’s central bank would again cut interest rates when monetary policy makers meet in February.After a series of dramatic rate hikes meant to rein in inflation, the bank last month unveiled its first rate cut in three years, with a half-point reduction to 11,5 per cent.The high interest rates have led to enormous drops in car purchases while imposing a heavy burden on homeowners who have seen their mortgage payments shoot up over the last two years.Nedbank economist Carmen Altenkirch said inflation would likely remain on a downward track, predicting the January figure would come to between seven and eight percent and that the bank would continue to lower its benchmark rate.’This is very good news even though it was expected – inflation has ended the year on a downward trajectory,’ she told the Sapa news agency.’The SA Reserve Bank will probably be less conservative about rate cuts and will probably cut the repo rate by 100 basis points in February,’ Altenkirch said. – Nampa-AFP