July inflation good news for Reserve Bank interest rates

South Africa’s annual consumer price inflation (CPI) cooled in July, continuing its downward trend in recent months.

StatsSA announced today that annual CPI was 4.7% in July 2023, significantly down from the 5.4% recorded in June 2023. This is the lowest inflation the country has seen since July 2021.

In June, the inflation rate fell within the South African Reserve Bank’s (SARB) target range for the first time since April 2022.

July’s rate is also within the SARB’s target range of 3% to 6% and far closer to its target midpoint of 4.5%.

According to StatsSA, the consumer price index increased by 0.9% in July 2023.

The main contributors to the 4.7% annual inflation rate were:

  • Food and non-alcoholic beverages increased by 9.9% year-on-year and contributed 1.7 percentage points;
  • Housing and utilities increased by 5.1% year-on-year and contributed 1.2 percentage points;
  • Miscellaneous goods and services increased by 6.3% year-on-year and contributed 0.9 of a percentage point.

In July, the annual inflation rate of goods was 5.5%, down from 6.3% in June. For services, it was 4.0%, a decline from 4.5% in June.

This data will inform the Monetary Policy Committee’s (MPC) interest rate decision at its next meeting in September.

At its latest MPC meeting, the SARB elected to pause the interest rate hiking cycle that has been ongoing since November 2021.

This decision came in light of South Africa’s June CPI inflation reaching its lowest level in months and falling within the SARB’s target inflation range of 3% to 6%.

However, the MPC warned that this was merely a pause in the hiking cycle rather than the end, and it would remain dependent on data for future decisions.

“At the current repurchase rate level, policy is restrictive, consistent with elevated inflation expectations and the inflation outlook,” said SARB Governor Lesetja Kganyago.

“Serious upside risks to the inflation outlook remain. In light of these risks, the committee remains vigilant, and decisions will continue to be data-dependent and sensitive to the balance of risks to the outlook.”


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