South Africa’s consumer inflation unexpectedly slowed in August, easing to 3.3% year-on-year from 3.5% in July, according to data released on Wednesday by Statistics South Africa. The surprise drop, which defied market expectations of a slight increase, was primarily driven by a moderation in food and fuel prices.
The new figures, released just one day before the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) is scheduled to announce its latest interest rate decision, have intensified speculation among analysts about a possible rate cut. The current benchmark repurchase rate sits at 7.00%.
Meanwhile, annual inflation rate for food and non-alcoholic beverages eased to 5.2% in August, down from 5.7% in July, with cheaper prices for items like milk, cereal products, and vegetables contributing to the decline.
Similarly, annual rate for fuel was also lower, at -5.7% from -5.5% in July. On a month on month basis the Consumer Price Index (CPI) saw a decrease of 0.1% in August, a significant shift from the 0.9% increase seen in July.
Despite the positive news on the headline inflation front, some economists remain cautious. The annual core inflation rate, which excludes volatile items like food and fuel, edged up to 3.1% in August.
Additionally, the SARB has indicated a long-term goal of anchoring inflation at the lower end of its 3%-6% target band, potentially aiming for 3%. This could influence the MPC’s decision, even with the latest inflation data.
