Case for rates cut heats up as CPI cools further

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 (Stats SA) shows that consumer price inflation (CPI) has cooled down further from 4.6% in July to 4.4% in August 2024.

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

Inflation has now fallen below the South African Reserve Bank’s midpoint target, strengthening the case for increased interest rate cuts this year.

Independent economist Elize Kruger says a 50 basis point cut in interest rates could be justified after CPI fell to its lowest level.

“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,” says Kruger.

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