JOHANNESBURG – South Africa’s headline consumer inflation slowed unexpectedly in August, data showed on Wednesday, with analysts saying the print could make the central bank take a less hawkish tone when it delivers its interest rates decision on Thursday.
Headline consumer inflation slowed to 4.9 percent year-on-year in August from 5.1 percent in July, and contracted 0.1 percent after rising 0.8 percent on a monthly basis, Statistics South Africa said.
Economists had expected CPI to rise to 5.2 percent year-on-year, according to a Reuters poll.
The data offered some respite after Africa’s most industrilised economy slipped into recession in the second quarter for the first time since 2009, a stinging blow to President Cyril Ramaphosa’s pledge to revive the economy.
The Reserve Bank held its benchmark rate for a fifth meeting in a row in July, but warned it was ready to tighten policy despite the weak economy in response to rising rand-driven inflationary pressures and offshore volatility.
The bank will announce its latest interest rates decision on Thursday, and all but one of the economists polled by Reuters predicted that the central bank would maintain its main lending rate at 6.5 percent as it weighs economic weakness against a pickup in inflation.
“These (inflation) numbers will provide some short term breathing space for the bank tomorrow,” BNP Paribas South Africa senior economist Jeff Schultz said.
Schultz however said pressure was building for the central bank to start sounding more hawkish due to a weaker rand.
The rand has weakened 17 percent against the dollar so far this year, hurt by subdued appetite for riskier assets globally and concerns over the domestic economy.
The rand extended its gains on the day to 1 percent in response to the inflation data.
Core inflation, which excludes the prices of food, non-alcoholic beverages, petrol and energy, fell to 4.2 percent year-on-year in August from 4.3 percent in July, while on a month-on-month basis was flat at 0.0 percent from 0.6 percent.