JOHANNESBURG - South Africa’s inflation rate in July dropped to a seven-month low, opening the door for further interest rate cut when the South African Reserve Bank’s (Sarb) monetary policy committee meets next month.
Data from Statistics South Africa showed that consumer prices slowed to 4 percent year-on-year in July from 4.5 percent from the previous month, well below the mid-point of the Reserve Bank's target range of 3-6 percent.
The Sarb cut the benchmark repo rate from 6.75 percent to 6.5 percent in a move that was largely seen as a boost to sluggish demand in the economy.
The fall in oil prices this month has also provided room for the Sarb to slash interest rates.
Oil prices have dropped by 7.3 percent so far this month due to worries grow about the strength of global growth
However, the marked weakness of the rand in recent weeks might well put the spanner in the works.
Capital Economics senior emerging markets economist John Ashbourne said the recent decline in oil prices supports his view that South African policymakers will cut their policy rate in September.
“Despite the softer rand, ZAR-terms oil prices will fall in year-on-year terms over the third quarter and into the fourth quarter, depressing headline inflation and opening a brief window for one more 25 basis point cut,” Ashbourne said.