Data released on Wednesday indicated that South African inflation remained constant in May, but as long as it stays above the target range set by the central bank, analysts do not anticipate interest rate reductions anytime soon.
In May, headline consumer
inflation was 5.2% year over year, unchanged from April (ZACPIY=ECI), opens new
tab, as predicted by Reuters's panel of economists.
The South African Reserve
Bank (SARB) has maintained its main interest rate at its highest level since
2009 for almost a year in an attempt to meet its goal of seeing inflation drop
to 4.5%, the middle of its target band.
Inflation has been above
5% for months, and the central bank estimated last month that inflation would
only stabilise at 4.5% in the second quarter of 2025.
According to a Reuters
poll released on Tuesday, the SARB could wait until November before cutting its
repo rate (ZAREPO=ECI).
The establishment of a
government of national unity following last month's election, according to
Capital Economics analyst David Omojomolo, may allay the central bank's fiscal
worries, increasing the likelihood of a rate cut before the year is out.
Following the data
released on Wednesday, Annabel Bishop of Investec Bank stated that the central
bank's stance would likely stay hawkish for the time being.
For the first time since
apartheid ended thirty years ago, the African National Congress (ANC) lost its
majority in the May 29 election. As a result, five political parties have
joined the ANC in a unity government.
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