Inflation drops again

REPO: DECLINE GIVES BANK MORE ROOM TO CUT RATE BY 25 POINTS

- Ina Opperman

The fourth consecutive drop in inflation last month, to 3.8% from 4.4% in August, should give the Reserve Bank greater confidence to cut the repo rate by 25 basis points next month, economists say.

Jee-A van der Linde, senior economist at Oxford Economics Africa, says the inflation rate cooled more than expected last month and further disinflation was expected this month.

“The outcome was slightly below our forecast of 3.9%. Inflation continues to surprise to the downside with the overall near-term outlook decidedly benign.”

He points out that the latest inflation print of 3.8% shows that South Africa’s real repo rate is comparatively higher at 4.2%.

“This should give the South African Reserve Bank (Sarb) even greater confidence to lower the repo rate by a further 25 basis points in November and continue its easing cycle well into 2025.

“In addition, the successive sub-4.5% inflation reading suggests that now might be an appropriate time to lower South Africa’s inflation target and we anticipate that Finance Minister Enoch Godongwana might shed further light on this topic when he delivers the medium-term budget policy statement next week.”