South Africa's Producer Price Index slowed significantly to 4.8% in the year to June -- its slowest read since February 2021 -- from 7.3% in May. Price pressures remain, but they are clearly abating, providing the South African Reserve Bank with space to hold rates steady.

At 4.8%, the June Producer Price Index (PPI) read fell well short of Bloomberg consensus expectations of 5.8%. Pointedly, food product inflation slowed to 8.0% from 8.8% in May. And on a monthly basis, PPI fell by 0.3%, pulled down by a 1.6% month-on-month decrease in coke, petroleum, chemical, rubber and plastic products.

This was the lowest PPI read since February 2021, when it was 4.0%. It accelerated sharply from there, reaching 18.0% in July last year.

Following in the wake of consumer price data last week which showed that CPI braked to 5.4% in June -- falling within the SA Reserve Bank's 3%-6% target range for the first time in 14 months -- from 6.3% in May, the PPI number provides the central bank with further space to keep holding rates steady.

The SA Reserve Bank last week kept its key repo rate unchanged at 8.25% and the prime lending rate at 11.75% -- after 475 basis points worth of hikes since November 2021 -- and if inflation keeps slowing, it will have little reason to hike again.

"Have interest rates peaked? The answer is a resounding no," SA Reserve Bank Governor Lesetja Kganyago warned last week. But further...