CPI drops to 4.4% in August

Consumers can breathe a sigh of relief as prices ease to their lowest level in three years.

This as data released by Statistics South Africa shows that the Consumer Price Inflation (CPI) has cooled down further from 4.6% in July to 4.4% in August 2024.

Stats SA notes the contributions to the decline came from transport, housing, restaurants and hotels.

The Consumer Price Index (CPI) has fallen below the Reserve Bank’s 4.5% midpoint target, strengthening the case for interest rate cuts this year.

Fuel prices were the largest positive contributor, declining for a third consecutive month.

Although the Reserve Bank is widely expected to cut interest rates by 25-basis points on Thursday, independent economist Elize Kruger says a 50-basis point cut by the Reserve Bank’s Monetary Policy Committee tomorrow would not be unreasonable.

“This better outcome was mainly due to further decline in petrol and diesel prices and a really moderate scenario in terms of price pressures in the rest of the CPI basket. Looking forward we are seeing headline CPI dipping below 4% in September to an annual rate of 3.8% and to as low as 3% in October, so further notable moderation is on the table mainly due to the declines in fuel prices that we’ve already seen in September and the prospect of a further R1 per litre drop in the fuel price in October.”

Following an 8-month downtrend, food and non-alcoholic beverages contributed negatively to the inflation rate picking up to 4.7% in August, from 4.5% in July.

Analyst at ETM Analytics, Laura Campbell says, “And we saw the core CPI rate excludes volatile food and energy prices declining as well. The SARB is expected to cut interest rates this week by 25-basis points, slower fuel, water and electricity inflation accompanied by a more robust rand created a favourable set up for inflation to continue decelerating and in addition the absence of load shedding, and improvements to infrastructure in our ports and railways and through the prospects of the government of national unity will help to ease cost pressures going forward.”

The South African Reserve Bank is expected to announce its decision on interest rates in its next Monetary Policy Meeting on Thursday at 3pm.