South Africa: Inflation drops more than expected to over three-year low in September
Latest reading: Inflation eased to 3.8% in September from August’s 4.4%, moving further below the midpoint of the South Africa Reserve Bank (SARB)’s 3.0–6.0% target band. September’s figure marked the lowest inflation rate since March 2021 and surprised markets slightly on the downside. Looking at the details of the release, the sharp slowdown was broad-based, with reduced price pressures recorded for food, housing and transportation.
Accordingly, the trend pointed down slightly, with annual average inflation coming in at 5.1% in September (August: 5.2%). Meanwhile, core inflation was stable, coming in at August’s 4.1% in September.
Finally, consumer prices increased 0.09% in September over the previous month, matching August’s reading. September’s result marked the joint-weakest reading since December 2023.
Outlook: Our Consensus is for inflation to remain close to current levels in Q4, before increasing in H1 2025 and further in H2 2025 to the midpoint of the SARB’s target range. Average inflation should then hover around 4.5% through the rest of our forecast horizon to 2029.
Meanwhile, September’s notable slowdown upped market expectations that the SARB will cut rates again at its last scheduled meeting of 2024 on 21 November, a view shared by nearly all of our panelists.