In June 2024, South Africa’s inflation rate slowed to 5.1%, its lowest in six months, possibly encouraging the central bank to consider cutting interest rates later this year. According to Statistics South Africa, consumer prices rose 5.1% year-on-year in June, down from 5.2% in May, aligning with economists’ predictions. This development supports the Reserve Bank’s improved inflation outlook, projecting inflation to fall below the 4.5% midpoint of its target range by the fourth quarter.

Despite this optimistic outlook, the central bank has maintained a cautious approach, with officials emphasizing that policy adjustments will only occur once the target is consistently met. Last week, the bank’s six-member policy committee decided to keep interest rates at 8.25%. However, the decision was not unanimous, with two members advocating for a 25 basis point cut, while four supported holding the rates. Governor Lesetja Kganyago highlighted the need for a sustained inflation decline to ensure stability before making any policy changes.

The slowing inflation was partly driven by a 4.6% rise in the food and non-alcoholic beverages category, the slowest increase since September 2020. Additionally, transport costs increased by 5.5% in June, down from 6.3% in May. These factors contributed to the overall easing of inflation pressures, providing some relief to consumers and potentially giving the central bank more leeway to adjust interest rates in the near future.

This data suggests a cautiously optimistic outlook for the South African economy, with potential interest rate cuts on the horizon if the inflation trend continues downward.