Inflation rises slightly ahead of Reserve Bank interest rate decision

South Africa’s annual consumer price inflation (CPI) rose marginally in August but remains within the South African Reserve Bank’s (SARB) target range.

StatsSA announced today that annual CPI was 4.8% in August 2023, up from the 4.7% recorded in July 2023.

In June, the inflation rate fell within the SARB’s target range for the first time since April 2022.

July’s rate was 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 0.3% in August 2023.

The main contributors to the 4.8% annual inflation rate were:

• Food and non-alcoholic beverages increased by 8% year-on-year and contributed 1.4 percentage points;
• Housing and utilities increased by 5.5% year-on-year and contributed 1.3 percentage points;
• Miscellaneous goods and services increased by 6.2% year-on-year and contributed 0.9 of a percentage point.

In August, the annual inflation rate of goods was 5.6%, up slightly from 5.5% in June. For services, it was 4.0%, unchanged from July.

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

At its last MPC meeting in July, 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.”

Experts are unanimous that the SARB will again opt to keep the repo rate unchanged at its next meeting.