Reserve Bank faces tough call despite collapse in inflation
Consumer inflation slows to 2.1% in May, breaching the lower end of the Reserve Bank’s inflation target range
The Reserve Bank is facing a tough call on whether to cut interest rates again next week — or by how much — even after the inflation rate dropped below the lower end of its target range in May for the first time in almost 16 years, opening up further space for it to act.
At 2.1%, the reading from Stats SA was the lowest since September 2004. Inflation has now been at or below the midpoint of the 3%-6% target for 18 consecutive months. The Bank is due to make its next rates decision on July 23, having cut the repo rate by a cumulative 275 basis points (bps) to the lowest level since its introduction in 1998.