SOUTH AFRICA: Analysts Continue To Forecast SARB Easing After Benign CPI Print

South Africa's headline inflation inched higher in November, according to data released by Statistics SA Wednesday, but printed below the expected level and remained below the SARB's target range.

• JP Morgan wrote that inflation rose less than expected as "food prices again surprised to the downside." In addition, "the benign core inflation dynamics stem from a continued drift lower in core goods inflation to +2.8% Y/Y in November (from +3% Y/Y in October and +3.4% Y/Y in 3Q24), helped by a relatively stable currency. Services inflation similarly remained subdued and marginally trended lower (...) as public transport costs benefitted from lower gas prices at the pump in prior months and inflation in hospitality eased." They continue to look for a 25bp rate cut in January, but note that the outlook beyond that point is less certain. Their base case sees "two policy rate cuts in 2025 to a level of 7.25%, but with a range of 7% to 7.50% hinging on ZAR dynamics next year. In the event that USD/ZAR remains 18 in 1Q25, the second cut to 7.25% could potentially be pulled forward to March (July currently) and further easing may be possible."
• Nedbank note that "modest upward pressure emanated from 'housing and utilities', 'miscellaneous goods and services' and 'food and nonalcoholic beverages,'" while "lower transport costs contained the upside." They "expect inflation to drift higher into 2025, lifted by food and fuel prices." Nedbank point to a reversal in high base in food prices going forward and slowing global disinflation, but add that improved electricity supply, efficiency gains in logistics and heavier rainfall should contain the upside. In their view, despite upside risks, "inflation is expected to hover around the SARB's +4.5% Y/Y target for much of next year and average 4% in 2025." As a result, they expect the SARB to cut interest rates by 75bp in 2025.