South Africa’s inflation rate fell within the central bank’s target band in April for the first time in eight months, reinforcing chances that the rate-increase cycle may have come to an end.
Consumer-price inflation eased to 5.3 percent from 6.1 percent in March, Statistics South Africa said in a report released Wednesday in the capital, Pretoria. That’s the lowest rate since December 2015 and compares with the median estimate of 5.6 percent by 20 economists surveyed by Bloomberg.
The central bank’s Monetary Policy Committee, which announces its next interest-rate decision Thursday, has kept the repurchase rate unchanged for six meetings after raising it since January 2014 in a bid to keep price growth in its 3 percent to 6 percent target range. All 21 economists in a Bloomberg survey forecast the key lending rate will remain unchanged.
“The Reserve Bank is probably going to acknowledge in tomorrow’s meeting that we have reached the end of the hiking cycle,” Jeffrey Schultz, an economist at BNP Paribas Securities in Johannesburg, said by phone. “Around the September meeting, it could start to communicate that it is considering easing policy rates in the fourth quarter.”
Prices of food and non-alcoholic beverages rose 6.7 percent from a year earlier, the slowest pace since December 2015 and a fourth straight month of deceleration, the statistics agency said. Corn prices have plunged 67 percent since reaching a record in 2016, as the country recovers from the worst drought on record and is set for its biggest harvest of the grain since 1981.
“The downside surprise is likely to fuel stronger calls for a rate-cutting cycle to commence,” Gina Schoeman, an economist at Citigroup Inc. in Johannesburg, said in an emailed note. “Add in extreme global volatility and local political and policy uncertainty and, the SARB will likely keep steadfast in its prudent manner of being certain it would be embarking on a rate-cutting cycle.”
Bloomberg