South Africa’s Inflation Cools in March, Rate Cuts Remain On Hold

South Africa’s inflation rate dipped to a two-month low of 5.3% in March, offering some relief after a four-month climb. This still lies at the upper threshold of the South African Reserve Bank’s (SARB) target range of 3% to 6%, but slightly better than analysts’ forecasts of 5.4%.

The news is positive for consumers who have been battling rising prices, particularly for food and utilities. Several categories saw price moderation, including vegetables, fruits, and transportation. However, education and some service costs continued to climb.

While this is a welcome development, the SARB is likely to remain cautious. The decline is seen as temporary, with potential upward pressure from rising oil prices and a weakening Rand. Governor Lesetja Kganyago has emphasized the bank’s commitment to curbing inflation expectations, and an interest rate cut seems unlikely in the immediate future.

The report suggests that the SARB might hold its benchmark rate steady at 8.25% at its next meeting on May 28-30th. This could be positive for the Rand in the short term, but markets will be closely watching global oil prices and the currency’s performance to gauge the bank’s future moves.

Sources:Trading Economics, Reuters, Statistics South Africa, Financial Post, Tradingpedia.

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst

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