South Africa's annual consumer inflation slowed to 4.3% in July, marking the first decline in five months and falling below economists' expectations of 4.5%, data from Statistics South Africa showed.
The moderation was driven by softer food inflation, smaller municipal tariff increases, and a sharp drop in fuel prices. Food and non-alcoholic beverage inflation fell to 0.9% year-on-year, the lowest level since mid-2008, largely due to lower cereal and meat prices.
Municipal tariff increases, typically implemented in July, were smaller than in the prior year, contributing to the disinflationary trend. Fuel prices declined 7.1% month-on-month, while diesel prices fell 11.7%, pulling the annual fuel inflation rate down to 20.6% from 34.3% in June.
Despite the slowdown, inflation remains above the South African Reserve Bank's 3% target. The central bank held interest rates steady at its July meeting, citing restrictive policy settings aimed at returning inflation to target within two years. The next inflation reading is due on September 23, coinciding with the central bank's monetary policy announcement.
Analysts warned that inflation risks remain tilted to the upside, with potential renewed upward pressure from geopolitical tensions in the Middle East affecting global oil prices.
