JOHANNESBURG (Reuters) – South Africa’s annual inflation rate slowed sharply to 2.8% in October, data showed on Wednesday, setting the stage for another interest rate cut by the central bank this week.
Statistics South Africa said falling fuel prices were the main driver of the headline rate slowing from 3.8% in September.
October’s reading is the lowest inflation since June 2020, during the peak of the COVID-19 pandemic.
Independent (LON:) Economist Elize Kruger said developments in fuel and food prices play a larger role in October, which is considered a low month in surveys.
Petrol and diesel prices, regulated by the South African government, fell by more than a rand per liter in October.
Economists polled by Reuters had forecast inflation would slow to 3.1%, well below the 4.5% level targeted by the South African Reserve Bank (SARB), but just within the bank’s target range. 3% to 6%.
The SARB will announce its next interest rate decision on Thursday.
A Reuters poll published last week predicted the central bank would cut its repo rate by 25 basis points (bps), the same size of cut as in September, when the SARB cut rates for the first time in more than four years.
“Given the recent rhetoric from the SARB, the recent depreciation of the rand and a conservative (monetary policy) committee, a 25 basis point cut remains the baseline forecast,” Kruger said.