(Bloomberg) -- South Africa’s annual inflation rate fell below the midpoint of the central bank’s target range for the first time in more than three years, adding impetus for it to start easing.
Consumer prices rose 4.4% in August, compared with 4.6% in the prior month, Pretoria-based Statistics South Africa said Wednesday in a statement on its website. That beat the 4.5% median of 19 economists’ estimates in a Bloomberg survey.
The drop in the rate below the midpoint, where the central bank prefers to anchor expectations, plus a benign inflation outlook, is expected to prompt officials to cut their policy benchmark for the first time since 2020, when the pandemic spurred aggressive action.
Prices for Brent crude are more than $8 weaker than a month ago and expectations that the Federal Reserve will cut US borrowing costs later on Wednesday could help sustain a rally in the rand.
The currency maintained its gains and was 0.3% firmer at 17.5611 per dollar as of 10:44 a.m. in Johannesburg. It is trading at its best levels since July 2023. Yields on rand-denominated bonds due 2035 fell to 10.2%, the lowest level since February 2022.
Governor Lesetja Kganyago has stressed that the monetary policy committee will only adjust interest rates that have been at 8.25% since May 2023 when inflation is firmly at 4.5%. The MPC will announce its decision after 3 p.m. on Thursday at a press conference north of Johannesburg.
Economists in a Bloomberg survey done before the inflation release expect the MPC to lower the benchmark by 25 basis points. Forward rate agreements, used to speculate on borrowing costs, are pricing in a 30-basis-point cut.
Although food prices edged higher to 4.1%, the biggest contributors to slowing inflation were softer transport and housing and utility rates, which fell to 2.8% and 4.8% respectively.
--With assistance from Simbarashe Gumbo and Colleen Goko.
(Updates with chart and contributors in last paragraph)
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