South African Inflation at 7-Year Low Boosts Rate-Cut Case

JOHANNESBURG (Capital Markets in Africa )- South Africa’s inflation rate fell to seven-year low in March, making a stronger case for the central bank to consider an interest-rate cut.

Inflation slowed to 3.8 percent from a year earlier, Pretoria-based Statistics South Africa said Wednesday in a report on its website. The median estimate of 20 economists was 4.1 percent in a Bloomberg survey.

Price growth has remained within the central bank’s target range of 3 percent to 6 percent for a year, the longest run since 2015. The Reserve Bank projects inflation will remain within the band until at least 2020, stabilizing at just more than 5 percent.

Policymakers last month cut the repurchase rate by a quarter percentage point to 6.5 percent, the lowest level in two years, with Governor Lesetja Kganyago saying the bank wanted to see inflation close to the mid-point of the target.

“The better-than-expected inflation outcomes of recent months strengthen the case for accommodative monetary policy,” economists at Johannesburg-based Nedbank Group Ltd. said in an email. Considerable upside risks remain, including the chance of higher electricity, food and fuel prices, as well as the continued vulnerability of the rand, they said.

Since President Cyril Ramaphosa’s ascent to power following former President Jacob Zuma’s scandal-ridden tenure, the rand has strengthened against the dollar, gaining 9.1 percent since mid-December when he was elected leader of the ruling African National Congress.

Food prices rose 3.6 percent from a year earlier, less than the 4 percent increase in February and the slowest rate of growth since December 2013.

Core inflation, excluding the price of food, non-alcoholic beverages, energy and gasoline, was 4.1 percent in March, matching February’s figure.