South Africa’s annual inflation rate sharply fell to 2.8% in October, reaching its lowest level since June 2020.
South Africa’s annual inflation rate sharply fell to 2.8% in October, its lowest level since June 2020, with falling fuel prices being the main driver behind the slowdown. Data released on Wednesday set the stage for another interest rate cut by the South African Reserve Bank (SARB) this weekend.
According to Statistics South Africa, the main factor behind the 3.8% drop in September was a significant decrease in fuel prices. The October figure marks the lowest inflation level since the peak of the COVID-19 pandemic.
Independent economist Elize Kruger explained that while lower inflation is typically observed in October, the effects of fluctuating food and fuel prices have been more pronounced this year. “Fuel and food prices had a bigger impact in October, a month traditionally associated with lower inflation,” Kruger said.
In October, the government-regulated prices of petrol and diesel dropped by more than one rand per liter, significantly contributing to the overall decline in inflation.
Economists had expected inflation to fall to 3.1%, but the actual figure remained well below the South African Reserve Bank’s target of 4.5%, though still within the bank’s acceptable range of 3-6%.
The South African Reserve Bank is set to announce its interest rate decision on Thursday, with a 25 basis point rate cut widely expected. This comes after a similar move in September, which marked the first interest rate cut in over four years. Analysts predict that the SARB will continue to take a cautious approach to monetary policy, especially amid the rand’s recent depreciation.
Kruger said, “Given the SARB’s recent statements and the ongoing weakness of the rand, a 25 basis point cut remains the most likely scenario.”
