South Africa’s Inflation Rate Declines to 15 Year Low in May

South Africa, Africa’s second-largest economy, said its inflation rate moderated to a record 15-year low in the month of May.

According to South Africa’s national statistics agency, Consumer Price Index, which measures inflation rate, moderated to 2.1 percent year-on-year, below the 3 percent to 6 percent range targeted by the central bank.

This, experts attributed to drop in fuel cost and the slow down in general spending due to COVID-19 lockdown.

Busisiwe Radebe, an economist with Nedbank, said “This number won’t be a surprise to the Monetary Policy Committee (MPC). Inflation will have to surprise in a major way to what they have in their forecasts. What they will be concerned about most is growth.”

In May, the nation’s central bank had lowered the interest rate to a record low of 3.75 percent to stimulate the recession and lockdown ravaged economy. The bank did strike a cautious tone, warning monetary policy alone could not spur economic growth.

“At the May meeting, the feeling was the bank had reached the trough in rate cuts. So they’ll probably hold rates,” Radebe said. He added that a shift in the central bank’s 7 percent GDP contraction would be key indicator.