South Africa’s Inflation Falls to 4.4% in August, Interest Rate Cut Expected

South Africa’s annual inflation rate fell to 4.4 per cent in August, down from 4.6 per cent in July. This marks the first time inflation has dropped below the midpoint of the central bank’s target range in over three years, according to data from Statistics South Africa. Economists had predicted a fall to 4.5 per cent, but the decline surpassed expectations.

The decrease in transport and housing costs contributed to the slower inflation, with transport prices accounting for only 9 per cent of inflation in August compared to 44 per cent in mid-2022. Fuel prices also saw a reduction for the third consecutive month, with diesel and petrol prices both dipping. However, food prices edged higher, with notable increases in bread, cereals, and hot beverages.

“Lower annual rates were recorded for several product groups, most notably transport, housing, and restaurants & hotels. In contrast, inflation for food & non-alcoholic beverages (NAB) and alcoholic beverages & tobacco edged higher in August”, Statistics South Africa noted.

With inflation easing, economists expect the South African Reserve Bank to cut its interest rate for the first time in over four years. A 25 basis point reduction is widely anticipated, and the decision is set to be announced on Thursday.

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