Inflation eases, but is still above Reserve Bank’s upper limit

South Africa’s consumer price inflation (CPI) slowed to 7.6% year-on-year in August after jumping to 7.8% in July — a level not seen since the global financial crisis. 

August inflation was driven by transport prices, which increased by 21.2% year-on-year and contributed 2.9 percentage points to the headline number, Statistics South Africa said on Wednesday.

Food and non-alcoholic beverages increased by 11.3% year-on-year, and contributed 1.9 percentage points. Housing and utilities increased by 4% year-on-year and accounted for one percentage point. 

The inflation number was in line with consensus expectations, which took into account August’s fuel price cuts and a decrease in food inflation. During that month, the price of petrol and diesel dropped by 4.9% and 3.5% per litre, respectively.

Petrol prices are expected to continue their descent in September as the rand strengthens and international oil prices slide, according to industry bodies such as the Automobile Association.

Statistics South Africa, however, noted on Wednesday that nine of the 11 food and beverage categories recorded an annual inflation rate above 8% in August. 

Analysts recently told the Mail & Guardian that although fuel prices are decreasing, food inflation has not yet peaked. This will likely lead the reserve bank to dial back the scale of the rate hikes after September. 

On Thursday, the South African Reserve Bankmonetary policy committee will meet to decide whether to raise interest rates further.