South Africa’s annual consumer inflation rate eased in July for the first time in five months, helped by lower fuel prices, softer food inflation and slower increases in municipal tariffs.
Statistics South Africa said on Wednesday that inflation fell to 4.3% in July from a two-year high of 5% recorded in June. The figure was also below the 4.5% forecast by economists.
The statistics agency attributed the slowdown to three main factors: weaker inflation in food and non-alcoholic beverages, smaller increases in municipal tariffs, and declining fuel prices.
Annual fuel-price inflation dropped sharply to 20.6% in July from 34.3% in June, reflecting lower petrol prices as crude oil prices retreated from highs reached at the beginning of the Middle East conflict.
However, fuel prices remain volatile, with global energy markets still sensitive to geopolitical developments.
Statistics South Africa said the moderation in food and non-alcoholic beverage inflation was driven largely by lower cereal prices and slower increases in meat prices.
Inflation was also restrained by smaller increases in municipal tariffs, particularly for electricity, water and refuse removal, which are typically adjusted in July.
Despite the July decline, headline inflation remains above the South African Reserve Bank’s 3% target.
Core inflation, which excludes food and energy prices and is closely watched as a measure of underlying price pressures, edged up to 4.2% year-on-year in July from 4.1% in June.
The latest inflation figures are expected to strengthen expectations that the central bank will leave interest rates unchanged as it assesses the economic impact of the conflict involving Iran.
The bank surprised investors and economists in July by keeping its benchmark interest rate unchanged, saying monetary policy remained sufficiently restrictive to bring inflation back to its target within two years.
