By Sfundo Parakozov and Kopano Gumbi

JOHANNESBURG (Reuters) – South Africa’s annual inflation rate fell for the first time in five months in March to its lowest level since June 2020, driven by a drop in fuel costs and slower tuition fee increases.

Headline consumer inflation eased to 2.7% year-on-year from 3.2% in February, below the 2.9% expected by economists and outside the South African Reserve Bank’s (SARB) 3% to 6% target range.

Statistics South Africa reported that the fuel index declined by 8.8% last month. Education fees, surveyed annually in March, rose 4.5%, slower than the previous year’s 6.4% increase.

Some analysts believe the latest inflation data may provide the central bank with leeway to cut interest rates at its next monetary policy meeting in May. Elize Kruger, an independent economist in South Africa, stated that there is significant room for the central bank to lower rates further to support the economy amid global trade tensions.

The SARB left its key lending rate unchanged at its last meeting in March after three consecutive cuts, citing risks from President Donald Trump’s tariffs and the country’s controversial national budget. The bank maintained a cautious tone during a biannual monetary policy review last week.

Analyst Elna Moolman from Standard Bank noted signs of weakness in the residential rental market, which she indicated was helping keep inflationary pressures subdued. However, according to Moolman, the SARB’s concerns surrounding global tariffs and a weaker local currency suggest that any further rate cuts may not occur soon.