South Africa’s latest inflation data shows a slowdown, but economists caution that it is unlikely to lead to immediate relief for borrowers.
Statistics South Africa reported that consumer inflation fell to 3% in February, down from 3.5% in January, landing within the central bank’s revised target range. While this is positive news, markets and analysts do not expect the South African Reserve Bank (SARB) to reduce interest rates at its upcoming Monetary Policy Committee (MPC) meeting on Thursday, 26 March.
Global Risks Weigh On Outlook
The ongoing conflict involving the United States, Israel, and Iran has contributed to volatility in global energy markets. Oil prices have surged over 40% since late February, with Brent crude rising above $100 per barrel. At the same time, the rand has weakened against the dollar, creating upward pressure on inflation. SARB Governor Lesetja Kganyago has previously emphasised that local inflation is highly sensitive to currency fluctuations, even more than to oil price changes.
Fuel Prices Expected to Rise
South African motorists have already experienced fuel price hikes in March, with projections indicating further increases in April, including R4.74 per litre for petrol and R7.83 per litre for diesel. Rising fuel costs are expected to drive inflation higher in the coming months.
Interest Rates Likely to Hold
Despite February’s inflation figures meeting the target, markets anticipate that the repo rate, currently at 6.75%, will remain unchanged. The MPC is expected to adopt a cautious approach, taking into account rising oil prices, currency volatility, and global geopolitical tensions. Economists predict inflation will average around 3.2% in the first quarter of 2026 before climbing closer to 4% in the second quarter as fuel pressures mount.
About the MPC
The SARB’s Monetary Policy Committee meets every two months to review and announce changes to the country’s repo and prime lending rates. The committee currently has six members, with Governor Lesetja Kganyago holding the deciding vote when necessary. The upcoming meeting will be the second interest rate announcement of 2026, following a 25 basis point cut in November 2025 and a hold in January 2026.
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