The annual inflation rate slowed sharply to 2.8% in October, data showed on Wednesday, setting the stage for another interest rate cut by the South African Reserve Bank this week.

Statistics South Africa said falling fuel prices were the primary driver of the slowdown in the headline rate from 3.8% in September. October’s reading is the lowest inflation has been since June 2020, during the peak of the Covid-19 pandemic.

Independent economist Elize Kruger said fuel and food price developments play a greater role in October, which is considered a low survey month. South Africa’s government-regulated petrol and diesel prices fell by more than R1/l in October.

Economists had forecast inflation would slow to 3.1%, well below the 4.5% the Reserve Bank aims for but just within the bank’s 3%-6% target range. The Bank will announce its next interest rate decision on Thursday.

A Reuters poll published last week predicted the Bank would lower its repo rate by 25 basis points, the same size of cut as in September, when it cut rates for the first time in more than four years.

“Given recent Sarb rhetoric, the recent rand depreciation and a conservative [monetary policy] committee, a 25 basis point cut remains the base-case forecast,” Kruger said. — Bhargav Acharya, Kopano Gumbi and Tannur Anders, (c) 2024 Reuters

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