Room for one more interest rate cut in South Africa

South African inflation quickened to a four-month high in June, as prices of beef and vegetables spiked.

Consumer prices rose 3% from a year earlier, compared with 2.8% in May, Pretoria-based Statistics South Africa said on Wednesday in a statement on its website. The median estimate of 12 economists in a Bloomberg survey was 3.1%.

Food and non-alcoholic beverage prices rose 5.1% – reaching a 15-month high as stewing beef, mince and steak costs jumped because of an outbreak of foot-and-mouth disease. Prices of stewing beef climbed 21.2% — the fastest pace of record.

Inflation has now been near the floor of the monetary policy committee’s 3%-to-6% target range for nine straight months. 

The latest data may prompt policymakers, who cut the key rate to 7.25% from 7.5% in May, to cautiously lower borrowing costs by another quarter point.

Traders added to bets on a central bank rate cut next week, with forward-rate agreements pricing in 24 basis points of easing compared with 22 basis point on Tuesday.

Stocks also extended gains with the FTSE/JSE Africa All Share index rising 0.9%.

Bonds extended gains, with yields on benchmark 2035 securities falling three basis points to 9.82%. The rand held a 0.2% decline against the dollar.

Chinese deflation, a weaker dollar and uncertainty about how nations will respond to US President Donald Trump’s tariff onslaught are making forecasting a nightmare, South African central bank Governor Lesetja Kganyago said last week. “There are things that we are not sure about. We do not know in which direction they would go.”

The MPC will announce its decision on July 31.