Small inflation rise leaves room for rate cuts, analysts say

By Kopano Gumbi

South Africa’s inflation rate edged higher in June, reaching the base of the central bank’s target range, but analysts said there was still scope to ease monetary policy.

Headline consumer inflation rose to 3.0% year-on-year, up from 2.8% in May and in line with the median forecast of economists polled by Reuters.

The South African Reserve Bank has cut its repo rate at four of its last five policy meetings as, since August 2024, inflation has been below the 4.5% level it aims for.

That is the centre of the bank’s 3%-6% band and the bank, known for its caution, has repeatedly said it would prefer to lower the target.

Statistics South Africa said annual inflation for food and non-alcoholic beverages hit a 15-month high in June, a significant contributor to the higher headline rate.

Higher costs for rentals and utilities also drove inflation upwards, while fuel prices extended their decline