While consumer price inflation (CPI) has returned to the South African Reserve Bank's (Sarb) target range of three to six percent, inflationary pressures remain, the DA said on Wednesday.

Earlier, Statistics SA announced that consumer price inflation had eased slightly to 5.9 percent year-on-year in October from 6.1 percent year-on-year in September.

"This suggests that South Africa can expect a gradual easing of inflationary pressure and that the independent stance maintained by the SA Reserve Bank is helping to improve price stability and bring us back into the target range," DA finance spokesman Dion George said in a statement.

"Not out of the woods yet"

However, he said the country was "definitely not out of the woods" yet.

"It is essential that inflation is contained on an ongoing basis; its impact on households across the economic spectrum, and particularly on the poor and those living off fixed incomes, remains one of the most important impediments to economic development in South Africa," George said.

He said calls for an amendment SARB's mandate were often made in isolation of the actual economic context.

"Conducting monetary policy is an extremely technical and sensitive area of governance.

"It is crucial that the Bank is sure of its independence in order to meet its mandate of price stability."

George said the DA would continue to support the notion that Sarb remain independent against undue political interference.

Pressure from Eskom

He said significant inflationary pressure was expected from Eskom's tariff increases.

"In response to a DA question posed at the finance committee last week, a senior Reserve Bank official clearly stated that inflation will remain above six percent if Eskom were to increase the price of electricity to 45 percent for each of the next three years," he said.

"Even at a lower rate, electricity tariff increases for Eskom will put pressure on prices," he added.

He also warned of pressures from oil price base effects.

"In December 2008, Brent crude oil dipped to USD40 per barrel, but has inched upwards to the current price of USD76, which translates to a 90 percent increase for December 2009 if the oil price does not change in the next few weeks."

George said oil prices had shown an annual contraction for most of 2009 due to the peak recorded in the previous year, but the sudden drop in prices towards the end of 2008 had technical repercussions for CPI.

Wages pose a problem

He said inflationary pressures could also spring from higher wages.

"Wage determination is traditionally backward looking, which means that workers would use recent inflation data as a basis for negotiations.

"This effectively perpetuates high levels of inflation since there is no account of the future drop in inflation figures."

George said the increase in the weighting of the services component of CPI from 40.6 percent to 45.8 percent compounded this source of inflationary pressure.

Increases to the public sector wage bill had also outpaced inflation by a growing margin and as the public sector swelled, so too did it impact on the rate of inflation.

George said downward prices were "sticky".

"In general, South Africa has a particularly inflexible price-setting culture, or 'downward sticky' behaviour in the market.

"This means that retailers and service providers are often loathe to reduce their prices in the event of reduced demand."

George said this was particularly true of services inflation, where structural determinants such as employment contracts effectively excluded the option of flexible wage setting conditions.

"The price of goods also remains high due to relatively weak competition among major retailers and producers," he said.