South Africa's Inflation Hits Three-Year Low, Signals Rate Cut

South Africa's inflation dropped to a three-year low in July, aligning closely with the central bank’s target. Consumer inflation decreased to 4.6%, sparking expectations of an interest rate cut in September. Economists suggest the rate could fall further by the year's end, driven by lower food and fuel costs.

South Africa's inflation rate fell to a three-year low in July, coming close to the level the central bank aims for and bolstering expectations of an interest rate cut next month.

Consumer inflation stood at 4.6% year-on-year in July, down from 5.1% in June, according to the national statistics agency. Analysts had anticipated an annual inflation rate of 4.9% for July.

The South African Reserve Bank (SARB) prefers inflation to hover around 4.5%, the midpoint of its 3% to 6% target range, but it has exceeded that level since mid-2021. The recent data supports the likelihood of a 25 basis point cut in the main interest rate during the bank's policy announcement on September 19.

(With inputs from agencies.)