Petrol Price Cuts Bring Relief to South Africans as Interest Rate Drops Loom

South African motorists are set to enjoy more savings at the pump this month, with petrol prices dropping by 22 cents per litre on Wednesday, 7 May. This follows April’s 72 cents per litre cut, delivering meaningful relief for households and businesses alike.

The global drop in oil prices—with spot prices falling below $62 a barrel—has been a key driver of the local fuel price reduction. Combined with a strengthening rand, which improved to R18.21/USD, the conditions are aligning for yet another petrol price cut in June, according to Investec’s Chief Economist Annabel Bishop.

“There’s nothing currently disrupting this trend,” Bishop noted. “If it holds, another cut is likely next month.”

Lower Fuel Prices Help Tame Inflation

While cheaper petrol immediately eases pressure on consumers, its wider impact on inflation is arguably more important. Bishop pointed out that headline inflation has dropped to 2.7% year-on-year, a steep fall from the 7.8% peak in July 2022, putting it below the South African Reserve Bank’s (SARB) target range of 3-6%.

Core inflation, which excludes volatile components like fuel and food, has also cooled significantly, dropping from 5.3% two years ago to just 3.1% today. This suggests that inflationary pressures across the economy are mild—and that interest rate cuts are becoming more viable.

Interest Rate Cuts Expected in July and November

In a shift from earlier predictions that rate cuts would only resume in 2026, economists now expect two interest rate cuts in 2025—one in July and another in November, each by 25 basis points.

Bishop attributes this to both local disinflation trends and a changing global environment, particularly in the United States, where the Federal Reserve is now forecast to make 75bps in cuts before year-end.

“This global shift will also support the rand, which in turn will help to keep inflation low locally,” Bishop explained.

Global Growth Risks Still Linger

Despite the positive developments, South Africa’s economic outlook remains under pressure. Growth forecasts have been downgraded, and trade tensions between the US and China could weigh further on global and local performance.

Bishop warned that while some cooling in tariff escalations may occur by late 2025 or early 2026, global uncertainty and domestic structural challenges still limit growth potential.

Even so, the anticipated petrol price cuts and possible interest rate relief offer some breathing room for consumers and a more optimistic outlook for the second half of the year.

What’s Next: SARB’s MPC Meeting in May

All eyes are now on the SARB Monetary Policy Committee (MPC) meeting scheduled for 29 May, where the bank is expected to hold interest rates steady. However, if inflation stays low and fuel prices continue to fall, the door remains open for cuts later in the year.

Petrol price cuts are delivering real relief to South African wallets—and the economic indicators point to even more positive news ahead. With lower inflation, a stronger rand, and potential interest rate cuts, the coming months could be a welcome turnaround for consumers and businesses alike.

{Source: BusinessTech}

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