South Africa’s Inflation Rate Declines, Paving Way for Interest Rate Cuts

According to data released on Wednesday, the inflation rate in South Africa has dropped more significantly than anticipated, reaching its lowest level since April 2021. This decrease in inflation is bolstering expectations that the central bank will reduce interest rates this week.

The headline consumer inflation rate has decreased to 4.4% year-on-year from 4.6% in July. This figure is just below the 4.5% midpoint of the South African Reserve Bank‘s target range, where it aims to maintain inflation. Analysts surveyed by Reuters had predicted a reading of 4.5%.

“The table is laid for the interest rate cutting cycle to commence,” stated Elize Kruger, an independent economist. The decrease in inflation was influenced by easing price pressures in sectors such as transport, housing, and hospitality, as reported by Statistics South Africa.

However, food inflation saw a slight increase, rising to 4.7% annually from 4.5% in July, thereby reversing an eight-month trend of decline. This mixed inflation picture reinforces expectations that the central bank will cut interest rates on Thursday for the first time in more than four years.

Even before the inflation figures for August were released, there were predictions that the central bank would lower its main lending rate by 25 basis points. These developments have been reported by Tannur Anders and Kopano Gumbi, with the editing team including Alexander Winning and Christina Fincher.