South Africa inflation slows to six-month low on food, transport costs

AFRICAN BUSINESS AND ECONOMYJuly 26, 2024 at 1:51 PM UTC

TLDR

South African inflation rate slows in June, standing at 5.1% year-on-year, down from 5.2% in May, potentially leading to a rate cut by the central bank.
Statistics South Africa data reveals inflation has been above 5% for 10 consecutive months, contrary to the SARB's 3%-6% target band preference.
Despite continued disinflation, the SARB maintains the main lending rate at 8.25% for over a year.

South African inflation slowed in June, according to data released by Statistics South Africa this week, potentially paving the way for the central bank to cut rates at its next meeting.

Headline consumer inflation stood at 5.1% year-on-year in June, down from 5.2% in May. Statistics South Africa data showed that inflation has remained above 5% for 10 consecutive months, while the South African Reserve Bank (SARB) prefers it to be at the midpoint of its 3%-6% target band.

Due to the slow rate of disinflation, the central bank has kept its main lending rate unchanged at 8.25% for more than a year.

Key Takeaways

A major concern for the South African Reserve Bank (SARB) has been high food and services prices, but June data indicates these have both decreased to 4.6% from 4.7% in May, nearing the midpoint of the target range. Analysts suggest that lower food and services inflation supports the potential for the central bank to begin cutting rates in September, with a 25 basis point cut being seen as acceptable. Core inflation, which excludes food and fuel prices, was 4.5% in June, according to Statistics South Africa.

Economy

Inflation

South Africa

Interest Rate

Monetary Policy