Sarb poised for rates cut despite inflation ticking up to 4-month high

THE South African Reserve Bank (Sarb) may once again loosen its monetary policy before the year draws to a close despite recent data revealing an uptick in consumer price inflation.

- SIPHELELE DLUDLA

This comes as the Sarb’s Monetary Policy Committee (MPC) will announce its decision on the policy rate next week after cutting the repo rate by 25 basis points to 7.25% per annum in May.

Data from Statistics South Africa (Stats SA) on Wednesday showed that the headline consumer price index (CPI) edged higher to 3.0% in June after holding steady at 2.8% in April and May.

This was the 11th consecutive month in which inflation remained below the 4.5% midpoint of the Sarb’s 3-6% target range.

Stats SA chief director of price statistics, Patrick Kelly, said the annual rate for food and nonalcoholic beverages has notably surged to a 15-month high of 5.1%, with meat prices—especially beef—being the primary culprit behind this uptick.

The price of beef significantly rose on the back of the food and mouth disease outbreak in meat producing provinces, reducing the supply of red meat more than the demand in the market.

"Meat - particularly beef - continues to be the main driver of food inflation," Kelly said.