SA’s inflation trajectory supports interest rate cuts in the second half of 2024

SA’s latest inflation data for May was encouraging, with a 0.2% m/m increase, keeping annual inflation at 5.2%. This is still above the SA Reserve Bank’s target of 4.5%, but June’s petrol price decrease is expected to be followed by another in July, which will further bring down inflation, possibly towards 4% by year-end. As a result, some forecasters believe there could be three interest rate cuts by the SARB this year of 25 bps each, starting in July. STANLIB’s own forecast is for two interest rate cuts of 25 bps each, starting in September. Interest rate cuts, together with greater political stability if the Government of National Unity is successful, could help to stimulate the economy and attract foreign investment back to SA.