In July, the South African inflation rate neared the midpoint of the central bank’s targeted range, experiencing a decrease to its lowest level within a two-year timeframe, according to data that was released on Wednesday.
Statistics South Africa reported a deceleration in headline consumer inflation to 4.7% year-on-year for July, down from 5.4% in June (ZACPIY=ECI). This decline exceeded the expectations of analysts surveyed by Reuters, who had predicted a year-on-year rate of 5.0%.
In terms of a month-on-month comparison, consumer inflation stood at 0.9% in July, falling short of the projected 1.1% as per expectations.
In June, inflation receded to a level that aligns with the central bank’s target range of 3%-6%, marking the first instance since April 2022. Consequently, the South African Reserve Bank (SARB), following a sequence of 10 successive hikes, maintained its repo rate (ZAREPO=ECI) during its recent monetary policy meeting held in July.
The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) has emphasized its preference for observing inflation consistently hovering around the midpoint of its target range, approximately 4.5%, before considering any potential reductions in interest rates.
“The influence of statistical base effects, leading to upward pressure, is expected to persist from August throughout the fourth quarter of 2023. However, the Monetary Policy Committee (MPC) should discern these temporary fluctuations and not interpret them in isolation as a sole rationale for implementing a tightening of monetary policy”.