Consumer inflation moved further outside the Reserve Bank’s 3%-6% target range in December. The consumer price index (CPI) increased 6.8% in December compared with a year earlier, Statistics SA said, from November’s 6.6%.

Trading Economic had forecast a 6.8% increase, and the Bloomberg consensus was for a 6.5% rise.

The average inflation for 2016 was 6.4%, which is in line with the expectations of the Reserve Bank.

The Bank’s outlook for CPI inflation is that it will come back within the 3%-6% target range in 2017 when it is seen slowing to 5.8%, and easing further to 5.5% in 2018.

CPI increased by 0.4% between November and December.

Food inflation is still running high in SA, due to the lagged effects of a devastating drought of last year.

Food and nonalcoholic beverages inflation was 11.7% year on year, picking up slightly from 11.6% in November.

The transport component of the CPI increased 5.7% in December from a year ago.

The housing and utilities component increased by 1.3 percentage points in November compared to 1.4 percentage points in December while the subindex increased by 5.6% year on year.

Rand Merchant Bank’s analyst Gordon Kerr said on Wednesday ahead of the release that most economists forecast the peak in CPI to have been in the fourth quarter of 2016, and a gradual move back downwards into the target band during 2017.

Analysts from Nedbank Corporate and Investment Banking said on Wednesday, ahead of the release, that SA’s economic growth outlook had improved off a low base in 2016, and was expected to be 1.2% in 2017.

They said that if CPI came in as expected below the 6% upper band throughout the year, on lower food inflation, this would provide the Reserve Bank with some impetus for a flatter interest rate profile this year. The Bank's monetary policy committee is meeting next week.

The consumer price index was at 124.7 points in December 2016, compared with 116.8 in December 2015.

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