South African Reserve Bank Governor Lesetja Kganyago notes that inflation could dip below 4% in the coming months, offering more flexibility for further policy action after September’s interest rate cut, Bloomberg reports.

“We expect the next two or three prints; that they could have a three handle on them, and that provides policy space for us,” Kganyago said while addressing lawmakers in Cape Town.

He attributed the reduction in headline inflation to the fading impact of global supply shocks. The central bank’s projections indicate consumer price growth settling at 3.6% by the end of this year and averaging 4% in 2025.

Recent official data showed inflation slowed to 4.4% in August, dropping below the midpoint of the SARB’s target range of 3% to 6%, which aligns with the bank’s preferred level for price stability. This decline prompted policymakers to reduce rates by 25 basis points to 8%.

Core inflation, which excludes volatile food and energy prices, also slowed to 4.1% in August, signaling that “the disinflation process is now firmly underway,” Kganyago explained.

South Africa’s inflation outlook has improved, in part, due to an uptick in business confidence after the formation of a broad coalition government in May, which boosted the rand and helped lower import costs.

“There is now a positive vibe about South Africa,” Kganyago remarked, adding that the economy likely continued its recovery in the third quarter, following 0.4% growth in the previous quarter.

“In spite of other emerging-market currencies, the South African rand has been strengthening, which means we have been able to flush out the bulk of the negative news that was actually embedded in South African financial asset prices,” he added.

Meanwhile, financial institutions like Goldman Sachs, Standard Bank, Bloomberg Economics, and Nedbank have shared varying predictions about the future path of interest rates in South Africa.