South African Consumer Inflation at 4-Year Low in 2024 – Interest Rates Must Follow

The final average consumer inflation rate for South Africa for 2024 was released today indicating a 4,4% year average. This is the lowest annual inflation rate in four years.

Annual average consumer inflation was at 3.3% for 2020 and at 4,1% in 2019 the only two years in the last ten that were lower than 2024.

Q4 CPI – lowest inflation Rate in over 10-years

The really great news is that Q4, or the last quarter of 2024 saw a quarter inflation average that is the lowest fourth quarter (Q4) inflation rate in ten years and the lowest overall for ten years.

The Irony however is that the monetary policy committee (a division of the SA Reserve Bank, saw fit to only trim the interest rate by 25 basis points (0,25%) at its last meeting in November despite Inflation reaching a point below the stated inflation range of 3%-6% in some time.

This has raised the question of whether the Reserve bank will now make more diligent moves and reduce interest rates significantly when they meet next week Thursday.

Interest Rates Higher Now Than when Inflation was Much Higher

The repo rate in South Africa in January 2019, when the inflation rate was at 4,7% for the 2018 year, was 6,5% per annum, compared to the current 7,75% interest rate set at the November 2024 MPC meeting, despite the average inflation being lower than it was in 2019.

One could argue that a more than 1% interest rate cut is now overdue and that anything less than this would be irresponsible.

South Africa urgently needs every bit of economic stimulus it can get right now, and allowing businesses and individuals to access capital at lower rates and the knock-on effect of lower interest rates on available money and stimulating growth are important considerations.

Headline CPI Numbers:

Headline consumer price index (CPI) for all urban areas Annual consumer price inflation was 3,0% in December 2024, up from 2,9% in November 2024. The CPI increased by 0,1% month-on-month in December 2024.

The main contributors to the 3,0% annual inflation rate were:

• Housing and utilities up 4,4%
• Miscellaneous goods and services (6,6% and contributing 1,0 percentage point);
• Food and non-alcoholic beverages (2,5% and contributing 0,5 of a percentage point); and
• Alcoholic beverages and tobacco up 4,3%

In December 2024, the annual inflation rate for goods was 1,9%, up from 1,6% in November 2024; and services was 4,2%, down from 4,3% in November 2024.

Annual average headline CPI for 2024

Average annual consumer price inflation was 4,4% in 2024 – i.e. the average CPI for all urban areas for 2024 compared with that for 2023. This was 1,6 percentage points lower than the corresponding average of 6,0% in 2023. (see Table below)

Read More About Inflation Trends in South Africa: READ HERE