Annual consumer price index (CPI) inflation slowed to 4% year-on-year in July, down from 4.5% year-on-year in June and by more than expectations of 4.3% year-on-year, Statistics South Africa (StatsSA) said on Thursday.

This is the lowest CPI headline rate since January when it was also 4%. StatsSA said a fall in fuel prices and a rise in municipal tariffs were the key price movers during the month.

StatsSA said transport was the key influencing component of the July CPI outcome, with the contributions of the remaining CPI categories remaining unchanged.

Fuel prices edged lower in July, bringing some relief to motorists. This dragged annual transport inflation down to 3.0% from 5.5% recorded in June, which mainly explains the drop to 4.0% in the CPI headline rate. 

The price per litre of inland 95-octane petrol was R15.81 in July 2019. In July 2018, motorists were paying R16.02 per litre. 

Annual food and non-alcoholic beverage inflation was 3.4% in July, down from June's 3.7%. 

But prices for bread and cereal products continued to climb, registering an annual rise of 7.9%, slightly higher than June's 7.3%. Meat prices increased by 0.2% annually compared with 0.3% recorded in June.

Investec economist Kamilla Kaplan said CPI inflation was expected to average 4.6% year-on-year this year, well within the South African Reserve Bank's 3% to 6% target range. 

"Slowing wage growth, the moderation of inflation expectations to multiyear lows, sluggish economic growth and weak pass-through from rand depreciation point to an absence of meaningful upside inflationary pressures," Kaplan said.

"Inflation across most advanced and emerging market economies has softened as the oil price has receded from recent highs and growth in final demand has weakened. This has allowed for more accommodative monetary policy with central banks in most countries cutting interest rates."

Kaplan said the Reserve Bank was, however, likely to retain a cautious policy stance in view of the recent rand depreciation and persistent vulnerability of a sovereign credit rating downgrade.