South Africa’s inflation nears midpoint of target band in July

JOHANNESBURG (Reuters) -South African inflation approached the midpoint of the central bank’s target range in July, falling to its lowest in two years, data showed on Wednesday.

Statistics South Africa said headline consumer inflation slowed to 4.7% year-on-year in July from 5.4% in June, a bigger drop than the 5.0% year-on-year rate analysts polled by Reuters had predicted.

On a month-on-month basis, consumer inflation was at 0.9% in July, versus expectations for 1.1%.

Inflation fell to within the central bank’s target range of 3%-6% in June for the first time since April 2022, allowing the South African Reserve Bank (SARB) to leave its repo rate on hold at its last monetary policy meeting in July after 10 consecutive hikes.

The SARB’s Monetary Policy Committee (MPC) has stressed that it wants to see inflation sustainably around the midpoint of its target range, around 4.5%, before it contemplates rate cuts.

But some analysts think inflation could rise again in August.

“The … inflation rate is likely to lift somewhat in August on base effects as July 2022 proved to be the peak for the inflation trajectory,” Investec economist Annabel Bishop said in a research note.

“The upwards pressure from statistical base effects will continue from August over Q4 23, … although the MPC should look through the temporary rise and not necessarily see it as a cause on its own to tighten monetary policy.”

(Reporting by Nellie Peyton and Alexander WinningGraphic by Bansari Mayur Kamdar in Bangalore; Editing by Toby Chopra)