Johannesburg — South Africa’s inflation rate fell more than expected last month to its lowest since April 2021, data showed on Wednesday, reinforcing expectations that the central bank will cut interest rates this week.
Headline consumer inflation fell to 4.4% year-on-year from 4.6% in July (ZACPIY=ECI), opens new tab, just below the 4.5% midpoint of the South African Reserve Bank’s target range where it likes to see inflation.
The median forecast of analysts polled by Reuters was for a reading of 4.5%.
“The table is laid for the interest rate cutting cycle to commence,” said independent economist Elize Kruger.
Easing price pressures from transport, housing, restaurants and hotels contributed to August’s lower inflation print, data from Statistics South Africa showed.
However, food inflation ticked up to 4.7% in annual terms from 4.5% in July, reversing an eight-month downward trend.
In August South Africa’s headline inflation fell below the midpoint of the central bank’s target range of between 3% to 6% for the first time since April 2021.
The figures hardened expectations that the central bank will cut interest rates on Thursday for the first time in more than four years.
Even before August’s inflation figures were released, economists polled by Reuters were predicting the central bank would cut its main lending rate (ZAREPO=ECI), opens new tab by 25 basis points.
U.S. stocks closed nearly unchanged on Tuesday as investors braced for the Federal Reserve interest-rate decision on Wednesday.
*Tannur Anders & Kopano Gumbi, editing: Alexander Winning & Christina Fincher – Reuters
