SA’s inflation rate fell to its lowest rate in more than a decade in 2020, as Covid-19 took the wind out of consumers’ sails and put pressure on fuel prices.

Inflation, measured by the annual change in the consumer price index, averaged 3.3% in 2020, Stats SA said on Wednesday, adding that this is its lowest rate since 2004.

The 3.3% inflation rate is well below the midpoint of the Reserve Bank’s 3%-6% target range, with the data coming ahead of the Bank’s first interest rate decision for 2021 on Thursday.

Though it is a close call, the Bank is likely to cut interest rates on Thursday, said Capital Economics senior emerging markets economist Jason Tuvey, citing renewed Covid-19 restrictions that have darkened SA’s near-term economic outlook.

Inflation moderated to 3.1% year on year in December, from 3.2% in the previous month, Stats SA said. December’s figure was in line with the Thomson Reuters consensus.

Investec economist Kamilla Kaplan had expected inflation to moderate to 3.1% in December, citing lower fuel costs, with petrol and diesel prices down 11.3% and 14.3% year on year in December, respectively.

Additionally, December is a measurement month for rentals that should keep registering slower rates of growth, reflective of the more subdued property market, she said in a note ahead of the Stats SA release.

Stats SA said on Wednesday that actual rentals rose 1.2% year on year in December.

Update: January 20 2020

This article has been updated with changes and additional information.



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