The Reserve Bank has maintained the repo — at which it lends to commercial banks — steady at 8.25% for five consecutive meetings, since hiking it by 50 basis points in May 2023.
Consumer inflation eased year-on-year in April to 5.2% from 5.3% the month before, Statistics South Africa said on Wednesday. On a monthly basis, prices rose by 0.3% in April.
The annual inflation rate was driven by housing and utilities, which increased by 5.8%, miscellaneous goods and services (7.2%), food and non-alcoholic beverages (4.7%) and transport (5.7%), Stats SA said.
April’s inflation numbers will be a key indicator for the South African Reserve Bank (Sarb) when its monetary policy committee meets later this month to decide on interest rates.
Economists had correctly predicted a lower year-on-year inflation number for April, compared with March, but said this was unlikely to sway the Reserve Bank towards cutting its repo rate, for now.
The Reserve Bank has maintained the repo — at which it lends to commercial banks — steady at 8.25% for five consecutive meetings, since hiking it by 50 basis points in May 2023.
The central bank targets a 3% to 6% range for annual consumer inflation. In its most recent forecast, it said the rate would steadily decline over the course of the year, but would only reach the key 4.5% midpoint at the end of 2025.
“This forecast scuppers any chance of an interest rate cut this year, and makes one likely only towards the end of 2025, if at all, as the Sarb has said it will not cut South Africa’s interest rates until CPI inflation remains around 4.5% year-on-year,” Investec chief economist, Annabel Bishop said in a note.
“While a better-than-expected CPI inflation outcome for this year is possible, and we currently have lower forecasts than the Sarb on CPI, expecting it to reach 4.5% in (the fourth quarter of) 2024, and so a quicker cut, risks remain to this view,” she added.
In its report on Wednesday, Stats SA said the annual inflation rate of goods was at 5.7%, unchanged from March 2024; while services declined to 4.6% from 5.0% in March 2024.
Consumer inflation for food staples, including bread and cereals, was at 4.3% year-on-year and that for meat at 0.5%, while milk, eggs and cheese were at 8.7%.
“The stubbornness of inflation, which has not dropped to the targets of either major advanced economies or South Africa as underlying pressures are sticky, has been the key reason for the delay in interest rate cuts,” Bishop said.