Reserve Bank Governor Lesetja Kganyago noted that the continued drop in inflation could create room for more interest rate cuts. Picture: Simphiwe Mbokazi/Independent Newspapers
Another interest rate could be on the cards for South Africans as the Reserve Bank Governor noted that inflation could fall below 4% in the coming months.
According to Statistics South Africa, (StatsSA) consumer inflation slowed for a third consecutive month, cooling to 4,4% in August from 4,6% in July. This is the lowest inflation print since April 2021 when the rate was also 4,4%.
Governor Lesetja Kganyago noted on Thursday that the continued drop in inflation could therefore create room for more interest rate cuts, following the cut in late September.
“We expect the next two or three prints; that they could have a three handle on them and that provides policy space for us,” Kganyago said.
“The headline disinflation is mainly supported by petering global supply shocks”.
The repo rate is currently at 8% and the prime lending rate is at 11%.
The Reserve Bank has predicted that consumer price growth could settle at 3.6% in the fourth quarter of 2024 and could average 4% in 2025.
The Bank’s Monetary Policy Committee (MPC) will meet again in November and will decide if another interest rate cut is on the cards.
Kganyago believes that the disinflation process is now firmly under way.
“There is now a positive vibe about South Africa,” Kganyago emphasised.
“In spite of other emerging-market currencies, the South African rand has been strengthening, which means we have been able to flush out the bulk of the negative news that was actually embedded in South African financial asset prices,” he said.
Despite this positive sentiment, the rand has weakened substantially in the last week as it takes direction from the US.
The rand was trading at around R17.06 against the dollar at 8.30am on Monday last week.
This incredible rally did not last long, and on Friday, the rand had declined sharply to around R17.50 to the dollar at 8am.
The ZAR was trading at around R19.14 to the euro and around R22.85 to the pound.
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