CPI inflation is likely to have slowed to the mid-point of the South African Reserve Bank’s3-6% inflation target band in July.    A further moderation in food prices, a return to fuel price deflation and lower electricity tariffswill be the major drivers behind the lower July print.    We expect core CPI inflation to slow to 4.7% in July, with a further structural slowdown likelyin the medium term, in light of the persistent negative output gap and lower unit labour costs.In this environment, we see scope for the SARB to deliver a cumulative 100bp in ratereductions this cycle, which would leave real rates close to our r* estimate of 1.5%.

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