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South Africa Inflation Drops Sharply

SA supermarkets spend US$1bn on diesel for power

South Africa’s inflation dropped sharply in September, hitting its lowest level in more than three years and bolstering expectations for another interest rate cut by the central bank next month.

Annual consumer price inflation slowed to 3,8 percent from 4,4 percent in August, opens new tab, Statistics South Africa data showed.

Economists polled by Reuters had forecast inflation would drop to 3,9 percent, well below 4,5 percent – the mid-point of the South African Reserve Bank’s 3 percent-6 percent target range.

The Consumer Price Index (CPI) rose 0,1 percent month-on-month in September, the same as a month before.

“Inflation is well under control in South Africa, this is really the start of a period of about 6 months in which the headline CPI should be below 4 percent,” said independent economist Elize Kruger.

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Also read: Mutare Man Sentenced to 18-Years For Raping 15-Year-Old Neighbor

The central bank struck a measured tone at its September meeting when it trimmed its main interest rate by 25 basis points to 8 percent, saying there were still risks on the horizon.

Analysts expect the bank to continue easing policy in quarter point increments, taking the repo rate to 7 percent by the middle of next year.

“Larger 50 bps moves are unlikely, in our view,” Standard Chartered’s Razia Khan said in a research note.

“We think the SARB will want to proceed cautiously, monitoring global risks and any consumption boost from South Africa’s recent Two Pot Pension Reforms, which allow earlier pension withdrawals,” she said.

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