Inflation cools in March – good news for interest rates

South Africa’s annual consumer price inflation (CPI) was 5.3% in March 2024, down from 5.6% in February 2024.

Stats SA released South Africa’s inflation data for March 2024 today, which saw the consumer price index increase by 0.8% month-on-month in March 2024.

The main contributors to the 5.3% annual inflation rate were:

• housing and utilities – increased by 5.9% year-on-year 
• miscellaneous goods and services – increased by 8.5% year-on-year
• food and non-alcoholic beverages – increased by 5.1% year-on-year
• transport – increased by 5.3% year-on-year 

In March, the annual inflation rate for goods was 5.7%, down from 6.2% in February 2024.

For services, the rate was 5.0%, up from 4.9% in February 2024.

The South African Reserve Bank (SARB) has been attempting to bring the country’s inflation down sustainably within its target range by raising interest rates by a cumulative 475 basis points since the start of the current hiking cycle. 

The hiking cycle started in November 2021 and is ongoing, although the Monetary Policy Committee (MPC) has not raised interest rates since May last year.

At its July 2023 meeting, the MPC elected to pause the hiking cycle and has done so at every meeting since. South Africa’s repo rate has, therefore, been at an almost 15-year high of 8.25% since May 2023.

Kganyago has emphasised at every MPC meeting since July 2023 that, despite being paused, the hiking cycle has not necessarily ended, and the committee will remain data-dependent in its decisions.

He said interest rates will only be cut once inflation has fallen sustainably to within the SARB’s target range of 3% to 6% and is anchored around the mid-point of the range, 4.5%.

Below is a graph showing the trend of CPI in South Africa from January 2020 to March 2024.