A view on today’s CPI release and the impact on the next interest rate decision

The Consumer Price Index (CPI), published by Statistics South Africa (Stats SA), ticked up to 4.8% y/y in August 2023, following four consecutive decreases that led to inflation falling to 4.7% y/y in July.

“Considering inflation remained well within the target range in August, we maintain our view of another repo rate pause at the upcoming September 2023 interest-rate setting meeting, but the tone will likely be hawkish to reflect upward pressure on transport inflation, concerns over the volatility of the currency, higher administered prices and the risk of El Niño,” says Sanisha Packirisamy, economist at Momentum Investments.

“We expect the South African Reserve Bank to maintain a restrictive stance on monetary policy in light of fiscal dominance fears and persistent upside risks to the inflation profile. As such, we only expect the first cut in interest rates in the second quarter of 2024.”