Great news for interest rate cuts in South Africa
South Africa’s latest inflation figure hit 2.8%, giving the South African Reserve Bank (SARB) ample room to cut interest rates.
According to Stats SA, annual consumer price inflation dropped from 3.8% in September 2024 to 2.8% in October 2024.
The CPI decreased by 0.1% month-on-month in October 2024.
The latest figure is now below the SARB’s target range of 3% to 6%.
October’s print is the lowest since June 2020 (during the COVID-19 pandemic) when the rate was 2.2%.
Although the SARB’s Monetary Policy Committee (MPC) bases its decisions on the future movements of inflation, the latest figure will likely the committee room to cut rates when it announces its decision tomorrow, 21 November.
Many economists expect the MPC to continue cutting rates, with many expecting a 25 basis point cut, bringing the repo rate down to 7.75%.
“South Africa’s inflation target remains 4.5% y/y, and has not been lowered by National Treasury, and so there is no reason for the SARB not to cut interest rates tomorrow,” said Investec Chief Economist Annabel Bishop.
Driving the change
“Falling fuel prices remain the primary factor behind the slowdown. Petrol and diesel prices declined by 5.3% between September and October, taking the annual rate for fuel to -19.1%. The price for inland 95-octane petrol in October was R21.05, the cheapest since February 2022 when the price was R20.14.”
“The aggregate transport index decreased by an annual 5.3%, pulling overall inflation down by 0.8 of a percentage point.”
After staying steady at around 4.5% for six months, annual inflation for food & non-alcoholic beverages (NAB) retreated to 3.6% in October.
This is the lowest rate since November 2019 (3.5%). The majority & NAB subcategories saw a decrease in inflation in October, except for sugar, sweets & desserts and cold beverages.
“The price index for bread & cereals declined by 0.5% between September and October, dragging the annual rate down to 4.6%. A range of bread and cereal products were cheaper in October compared with September,” said Stats SA.
“Most notably, maize meal prices decreased by 2.0%, representing a third consecutive month of decline. Consumers also paid less on average for other key products such as spaghetti, macaroni, rice and samp.”
“Annual inflation for milk, eggs & cheese dipped steeply to 4.1% in October from 6.9% in September. The monthly rate was -0.2%, with price decreases recorded for milk products, yoghurt, and cheddar cheese.”
That said, the prices for custard, sour milk, eggs and mageu were higher in October compared with the prior month.
Sugar, sweets & desserts recorded an annual rate of 6.9%, which is far lower than the recent high of 18.5% seen in February.
The price index for the category rose by 1.0% between September and October, with chocolates, jam and white sugar seeing relatively large increases.
Despite hot beverages continued to register the highest inflation print among all food & NAB categories (14.1%), the rate has dropped from the 17.6% seen in July. The monthly rate was 0.8% in October, with large price increases for instant coffee, drinking chocolate and black tea.
The index for cold beverages increased by 1.1% between September and October, taking the annual rate from 5.7% to 7.0%. Prices for fizzy drinks and mineral water witnessed large monthly increases, but dairy blends and fruit juice concentrates were cheaper.
The graphs below show food and beverage products that recorded the most significant price changes in October:
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