South Africa's consumer price index (CPI) braked significantly in the year to June to 5.4% from 6.3% in May. Pointedly, it fell within the central bank's 3% to 6% target range for the first time in 14 months and was the lowest read since December 2021 when it was 4.5%. This does not mean the central bank will refrain from hiking rates again on Thursday.

The CPI data, unveiled on Wednesday by Statistics South Africa (Stats SA), is a sign that the South African Reserve Bank's (Sarb) aggressive tightening cycle is paying dividends. It has been relentless in its quest to contain inflation, which has seen it raise rates by 475 basis points since November 2021, taking its key repo rate to 8.25% and the prime lending rate to 11.75%.

This does not mean the Sarb will hit the pause button on Thursday when its Monetary Policy Committee (MPC) renders its next rate decision.

Analysts polled by Bloomberg from 7 to 12 July were divided about the prospects of the MPC holding or hiking again, with half of the 16 surveyed falling into one camp or the other. Their forecasts were made on expectations that the June CPI read was likely to fall within the Sarb's mandated target range.

Inflation is moving in the right direction, and a pause by the US Federal Reserve in its hiking cycle in June gives the MPC some breathing space to hold.

The Sarb needs to maintain a gap with the key US rate, currently between 5.0% and 5.25%, to keep the rand attractive to investors. But it has...