South Africa Sees First Drop In Inflation In 5 Months

Johannesburg: South Africa's annual inflation rate has decreased for the first time in five months, dropping to 2.7 percent in March from 3.2 percent in February, according to data released by Statistics South Africa (Stats SA) on Wednesday.

Stats SA said the decline was due to reduced fuel prices and lower tuition fees.

"The fuel index softened by 0.4 percentage points from February, taking the annual rate from -3.6 percent to -8.8 percent. The average diesel price fell to 22.8 rands (about 1.22 U.S. dollars) per liter in March, down from 24.85 rands per liter a year ago," the agency said.

It said that the annual increase in school fees was 4.5 percent, lower than last year's 6.4 percent.

Other notable declines in inflation were observed in the categories of food and non-alcoholic beverages.

With inflation now below the South African Reserve Bank's target range of 3 to 6 percent, a rate cut is expected at the bank's next policy meeting.

As the International Monetary Fund revised downward its forecast for South Africa's economic growth in 2025, governance and political analyst Sandile Swana said it was clear that demand and consumer spending would weaken.

As a result, Swana said the South African central bank may consider lowering the repurchase rate at its upcoming meeting in May.

"The repo rate should be lowered. Inflation is about demand, the GDP has been revised downward, and the Reserve Bank has to act to boost demand and spending in the economy," the expert noted.

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