Inflation: Headline CPI rose marginally in April, to +2.8% y/y from +2.7% y/y in March, driven by higher food inflation. Core inflation, which excludes volatile food and energy prices, decelerated in April to +3.0% y/y from +3.1% y/y in March. The ZAR price of fuel rose slightly in May, but not enough to raise broader price pressures. This supports further low CPI readings going forward, allowing the SARB the perfect opportunity to lower the inflation target to 3%.
Repo rate: The SARB resumed its monetary easing cycle in May, cutting the repo rate by 25 basis points to 7.25%. The SARB also revised its inflation forecasts lower, now projecting 3.2% for 2025 and 4.2%-4.4% through 2027, citing a stronger rand, lower oil prices, and the scrapping of VAT hikes. However, growth expectations were downgraded, with 2025 GDP now seen at just 1.2%.
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