Much better news on the inflation front has continued to emerge with the July statistics, with a significant drop in the inflation rate from the June level.  

Prof Raymond Parsons, economist from the North-West University (NWU) Business School, says the latest (July) consumer price index (CPI) figures confirm that inflation is steadily winding down and settling around the midpoint inflation target (4,5%) of the South African Reserve Bank (SARB). 

The figures were released by Statistics SA on 21 August. “These cost-moderating trends are now being further reinforced by factors such as the present strong performance of the rand and the continued prospect of lower fuel prices.”  

According to Prof Parsons, with core inflation now at 4,3%, it suggests South Africa is moving closer to low and stable inflation if current trends persist. 

“Lower inflation trends have developed earlier than the forecasts of the last Monetary Policy Committee (MPC) meeting. It would now be difficult for the MPC to justify keeping interest rates unchanged in the face of the much-improved inflationary outlook.” 

Prof Parsons says the table is clearly being set for an initial cut in interest rates when the MPC meets again next month.  

“Although the rate reduction may only be 25 basis points at this stage – and no silver bullet for low growth – it would begin a welcome cycle of easing borrowing costs for business and consumers.”