South Africa's inflation slows but no rate cut seen in election week
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South Africa's headline inflation slowed slightly in April, but analysts said an interest rate cut was unlikely next week when the central bank's monetary policy meeting overlaps with a national election whose outcome is uncertain.
Headline consumer inflation dropped to 5.2% year on year in April from 5.3% in March, Statistics South Africa data showed on Wednesday, whereas economists polled by Reuters had predicted another reading of 5.3%.
The slowdown was driven by a decrease in annual inflation for food and non-alcoholic beverages, offsetting fuel price increases.
The South African Reserve Bank (SARB) has tried to steer inflation back to the midpoint of its target band of between 3% and 6% by keeping its main interest rate at its highest level since 2009 for the past year.
Its next policy announcement is scheduled for May 30, the day after South Africans vote in national and provincial elections, and the central bank governor told Reuters last month that huge uncertainty over the results was keeping the country's risk premium elevated.
Jason Tuvey, deputy chief emerging markets economist at Capital Economics, said SARB officials would also be keeping a close eye on fiscal risks around the election and that his research firm did not expect any rate cuts this year.
Razia Khan, chief economist for Africa and the Middle East at Standard Chartered, said she did not expect much change in the bank's still-hawkish assessment of the inflation outlook.
The central bank said last month that the path back to 4.5% inflation would probably be "bumpy and protracted" due to setbacks in the disinflation trajectory.
At its last policy meeting in March, the SARB said it only expected headline inflation to reach 4.5% around the end of 2025.
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