SA inflation slows but no rate cut planned during election week

SA inflation slows but no rate cut planned during election week
SA inflation slows but no rate cut planned during election week

Headline inflation in South Africa slowed slightly in April, but analysts said an interest rate cut was unlikely next week, when the central bank’s monetary policy meeting coincides with national elections including the outcome is uncertain.

Headline inflation fell to 5.2% year-on-year in April from 5.3% in March, Statistics South Africa data showed, while economists polled by Reuters had forecast a further rise of 5.3%.

The slowdown is due to a drop in annual inflation for food and non-alcoholic drinks, offsetting increases in fuel prices.

The South African Reserve Bank (SARB) has attempted to bring inflation back to the middle of its 3-6% target range by keeping its main interest rate at its highest level since 2009 over the past year.

The next monetary policy announcement is scheduled for May 30, the day after national and provincial elections, and the central bank governor told Reuters last month that huge uncertainty over the results was holding down the country’s risk premium at a high level.

Jason Tuvey, deputy chief emerging markets economist at Capital Economics, said SARB officials would also closely monitor election-related tax risks and that his research firm did not anticipate a rate cut this year.

Razia Khan, chief economist for Africa and the Middle East at Standard Chartered, said she did not expect a big change in the bank’s still-upbeat assessment of the inflation outlook.

The central bank said last month that the return to 4.5% inflation would likely be “bumpy and protracted” due to setbacks in the disinflation path.

At its last meeting in March, the SARB said it only expected headline inflation to reach 4.5% by the end of 2025.

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