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Inflation cools slightly to 7.2%, but food prices remain red hot

Annual consumer price inflation cooled to 7.2% in December, down from 7.4% in November and 7.6% in October, Statistics SA reported on Wednesday.

The consumer price index increased by 0.4% in December from the previous month.

Prices of food and non-alcoholic beverages rocketed by 12.4% year-on-year, only slightly down from 12.5% in November.

Bread and cereal prices were 20.3% higher in December 2022 than a year earlier, while oils and fats (+22%) were also much more expensive. Meat prices rose 10% in 2022, while vegetables increased by 12%.

While South Africa has enjoyed bumper crops, fuel price hikes and load shedding have pushed prices higher.

Transport costs were almost 14% higher in December 2022 compared to a year ago, even after sizeable cuts in the price of diesel at the start of the month. Following further declines at the start of January, the petrol price is back to levels last seen before the invasion of Ukraine triggered an oil price surge.

The SA Reserve Bank only expects inflation to “sustainably” move back to its targeted level of 4.5% by the second quarter of 2024.

With inflation still far above its target level, traders expect the Reserve Bank to increase interest rates when the monetary policy committee (MPC) meets again on January 26th.

The prime rate has already moved from 7% in November 2021 to 10.5% currently, as the MPC attempts to cool inflation.

Average annual consumer price inflation for 2022 was 6.9%, compared to 4.5% in 2021. –