South Africa's consumer price index slowed faster than expected in May to 6.3% year-on-year, a 13-month low, from 6.8% in April. This may give the South African Reserve Bank the space it needs to end its tightening cycle.
At 6.3%, the May consumer price index (CPI) read was below market forecasts of 6.5% and was the lowest since April 2022 when it was 5.9%.
This means the 3% to 6% target range of the South African Reserve Bank (Sarb) is now in sight, and hopefully gives the central bank space to halt a tightening cycle that has seen 10 straight rate hikes taking the prime lending rate to a 14-year high of 11.75%.
"South African headline CPI inflation just decelerated a lot faster than anyone expected... and will see a further slowing on a more pronounced base effect (July 22 inflation at 7.8% y/y was the peak)," said Razia Khan, Chief Economist Africa and Middle East at Standard Chartered Bank in London.
"We can say it loudly now: NO FURTHER SARB HIKES appear to be required in this cycle."
Significantly, food inflation braked to 12% from 14.3% in April. While still elevated, food prices seem to be finally cooling, which should bring some relief to South Africa's cost-of-living crisis.
"After peaking at an annual rate of 37.6% in August 2022, the index for oils & fats continued to fall sharply in May, recording a ninth consecutive month of...