A better-than-expected print for headline inflation in July increases the likelihood that South Africa’s interest rate hike cycle has ended and the next move for the Reserve Bank will be to cut rates.<\/p>\n\n\n\n
Stats SA published the latest consumer price inflation figures for July showing that headline CPI dropped to 4.7% for the month, much lower than the 5.3% recorded in May and well below market expectations of around 5.0%.<\/p>\n\n\n\n
The lower figure puts CPI in the middle of the South African Reserve Bank’s (SARB’s) target range of 3% to 6%, and marks the fourth month of disinflation since March 2023 and the lowest point in two years.<\/p>\n\n\n\n
Since the SARB’s Monetary Policy Committee (MPC) started the rate hike cycle in November 2021, the central bank has maintained that interest rates would continue to rise as long as inflation remained high – only a sustained trend downwards in CPI would shift policy in this regard.<\/p>\n\n\n\n
This means that the downward trajectory of inflation seen this year spells good news for interest rates, and is likely to deliver another hold at the September meeting.<\/p>\n\n\n\n
This position aligns with market consensus among fund managers and economists in new polls run this past week.<\/p>\n\n\n\n