Relief in sight as annual consumer inflation slows to three-year low of 4.6% in July, rate cut looms

The South African Reserve Bank will feel vindicated in its monetary policy stance as consumer inflation in July finally subsided to the midpoint of its 3% to 6% target range, paving the way for a rate cut of at least 25 basis points when the bank’s Monetary Policy Committee next meets in September.

At 4.6% in July, the consumer price index was at its lowest level since July of 2021 and ebbed significantly from 5.1% in June. 

Leading the way was food inflation, which has been eating into the incomes of poor as well as middle-class households, fuelling a cost-of-living crisis. It slowed to 3.9% on an annual basis in July from 4.1% in June, its lowest level since January 2020. 

“While overall food inflation has slowed, bread and cereals is showing upward momentum. The category recorded an annual increase of 5.6% in July, up from June’s 5.2%,” Statistics South Africa (Stats SA) said. 

If you happen to like pizza, in July you were paying 11.6% more for your fix than you were in July 2023. 

“On a positive note, bread flour, cake flour, pasta and macaroni are cheaper than a year ago,” Stats SA said. 

The bread and cereals category remains a cause for concern in the wake of the El Niño-triggered drought that is expected to slash production of South Africa’s white maize crop this year by 26%, with far more dire consequences in the region. 

Read more: Loaded for Bear: Hunger in southern Africa reaches historic levels in El Niño’s wake

“Given the scale of the decline in the white maize harvest and the expected strong demand from southern Africa, we expect white maize prices to remain reasonably elevated for some time and thus sustain the increases in bread and cereal products in the food basket,” Wandile Sihlobo, the chief economist at the Agricultural Business Chamber, said in a note on the data. 

Source: StatsSA