For the first time since September last year, the rate of inflation in South Africa has gone down. Statistics SA said growth in CPIX, which leaves out mortgage costs, slowed to 13,0% year-on-year last month (September) from an all-time high of 13,6% in August. This is an indication that price pressures are starting to ease.

Some analysts are thinking that inflation peaked at 13.6% and we should start to see it continue to drop over the next couple of months. But one thing to consider is the strength of the rand. If the rand continues to weaken it will put further pressure on inflation. The rand has shed about 35% versus the dollar since the start of the year. It traded at around R10,3350/$ in early trade, compared with R10,34 just before the data was issued. Inflation is expected to fall by about two percentage points in January next year when the consumer price index (CPI) is rebased and reweighted. The CPI replaces the CPIX as the targeted measure of inflation from next year.

With the expected lowering of the rate of inflation, does this mean we could be inline for interest rate cuts? Let’s hope so.

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