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South Africa inflation drops sharply, cementing rate cut expectations

South African Rand currency

Photo by Reuters

21st August 2024

By: Reuters

  

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South Africa's inflation dropped more than expected in July, falling to within touching distance of the central bank's target and cementing analysts' expectations that the bank will cut interest rates next month.

Headline consumer inflation fell to a more than three year low of 4.6% year on year in July from 5.1% in June, statistics agency data showed on Wednesday, whereas analysts had forecast annual inflation of 4.9% last month.

The South African Reserve Bank likes to see inflation around 4.5%, the midpoint of its 3% to 6% target range, but it has been above that level since mid-2021.

Before the latest inflation print, most economists in a Reuters poll had predicted the SARB would reduce its main policy rate by 25 basis points in September, and a cut now looks more certain.

"The SARB has definitely run out of excuses to not cut interest rates ... and might have to consider a bigger cut," independent economist Elize Kruger said.

In month-on-month terms, inflation was at 0.4% in July compared to 0.1% a month before.

Edited by Reuters

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