Consumer inflation slowed for the third consecutive month, moderating to 4.4% in August from 4.6% in July. This was below consensus expectations, which forecast inflation would remain at 4.6% or slow slightly to 4.5%.
According to Stats SA, which published the August inflation data on Wednesday, this was the lowest inflation print since 2021.
Lower annual rates were recorded for several product groups, most notably transport (as a result of recent fuel price cuts) and housing, said Stats SA. In contrast, inflation for food and nonalcoholic beverages edged higher in August.
Inflation dipping below the SA Reserve Bank midpoint target of 4.5% earlier than expected should provide further impetus for the Bank’s monetary policy committee (MPC) to lower rates this week.
The MPC will announce its repo rate decision for September on Thursday and it is widely expected to cut rates by 25 basis points (bps) to 8%.
The MPC said in its July rates decision that SA’s inflation outlook had improved. At the time, the Bank forecast inflation to return to the midpoint of its 3%-6% target band in the fourth quarter of 2024. It previously forecast price increases would dip below 4.5% by only the second quarter of 2025.
The Bureau for Economic Research’s (BER) third-quarter inflation expectations survey published last week showed analysts, businesses and trade unions expected headline inflation to average 5.1% in 2024, down from 5.3% in the second-quarter survey.
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