Inflation: After slowing to a 4-year low of 2.8% in October, headline CPI increased slightly to 2.9% y/y in November. However, Inflation remains on a downward trend, and continues to surprise to the downside. It remains supportive of further rate cuts although ZAR weakness has dulled that. PMI data and the ILB auctions show that inflation expectations have moderated.
Repo rate: The SARB cut interest rates by 25bp, bringing the repo rate down to 7.75% in November. The SARB does not see the recent subdued inflation numbers as sustainable. While shorter-term inflation forecasts were revised downwards, those for the longer term have been revised upwards in part due to an upward revision in the electricity inflation expectations due to a massive tariff increase. Rate cut expectations have moderated in line with expectations in the US.
