Where to next for South Africa’s inflation and interest rates? Experts shed some light
Rising inflation could put pressure on the next interest rate decision.
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Although 2025 has, for the most part, seen moderate inflation, the latest figures released this week have shown a slight uptick in the Consumer Price Index (CPI).
September’s year-on-year CPI figure rose to 3.4%, up from 3.3% the previous month, as higher services and housing costs were offset by softer goods and fuel prices.
Housing and utilities swelled to 4.5% y/y, adding 1.1% to headline inflation, while services inflation rose to 3.9%, but goods inflation eased to 2.9%.
While food and non-alcoholic beverages inflation dropped from 5.2% y/y to 4.5%, the figure remains stubbornly high amid record meat prices.
But what does the future hold?
Considering the latest inflationary trends, FNB sees headline inflation rising to 3.8% y/y in October, reflecting the hike in average fuel prices seen this month, while seasonal food price pressures could compound the upward pressure on headline inflation.
However, the banking giant believes headline inflation will remain below 4% over the coming year, presuming that there are no major economic shocks.
“Inflation has remained benign this year, occasionally surprising the market to the downside,” FNB senior economist Koketso Mano remarked. “This has been supported by positive base effects, weak demand, and conducive import price dynamics.
“Going forward, we see oil prices remaining contained, the rand strengthening, and a rise in cheaper imports of consumer goods. This will keep imported inflation subdued. Furthermore, a slow recovery in the economy suggests that a still-restrictive monetary policy should constrain demand,” Mano added.
As a result of that, headline inflation should hover around the 3.5% mark, with risks tilted downward.
Consumers remain under pressure
Although September’s CPI increase was moderate, it still underscores the ongoing strain between rising living costs and salaries that continue to lag behind, says Thys van Zyl, CEO of Everest Advisory Services
“Inflation may look low on paper, but the real impact on households is significant. Prices for meat and other basic food items remain high, with meat inflation reaching its highest level in seven years. Utility costs (electricity and water) have risen by an average of 4.5% year-on-year. The average family is simply paying more for everything they cannot go without,” Van Zyl said.
“For most households, it feels as if there’s less money left at the end of every month. Even with low official inflation figures, the true cost of living remains substantially higher.”
Utilities, medical aid premiums and education fees have, for instance, seen above-inflation increases, leaving consumers caught in a cycle of rising expenses without meaningful salary increases. This ultimately means their purchasing power continues to decline, while their ability to invest is constantly being eroded.
Don’t hold your breath for a rate cut
The upward inflationary pressure could also see South Africans missing out on a much-anticipated interest rate cut when the Monetary Policy Committee (MPC) meets on November 20.
“Although inflation remains close to the 3% target, the upward trend suggests that the Reserve Bank will likely stay cautious. It’s also unclear whether Treasury will confirm an official 3% inflation target in next month’s Medium-Term Budget Policy Statement. The likelihood of an immediate rate cut is now very slim," Van Zyl said.
“The Reserve Bank will probably wait for more clarity on international oil and food prices, as well as US monetary policy, before moving. But for South African consumers, this means debt will remain expensive and saving even harder.”
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