Annual consumer inflation was unchanged at 2.8% in May, Stats SA reported on Wednesday, maintaining April’s five-year low and keeping price growth firmly inside the Reserve Bank’s 3%-6% target band.
Headline CPI rose 0.2% over the course of the month, down from 0.3% in April.
The outcome was in the middle of pre-release forecasts: independent economist Elize Kruger’s 2.8% call proved spot on, while the Bureau for Economic Research and Investec were a touch high at 2.9%, and Nedbank was low at 2.3%.
Core inflation (CPI excluding food, nonalcoholic beverages, fuel and energy) edged up to 3.0% year on year, still well below the Reserve Bank’s 4.5% midpoint.
Food and nonalcoholic beverages remained the biggest upward driver, accelerating to 4.8% year on year and adding 0.9 percentage points to the headline rate, while the housing and utilities category contributed another full percentage point. By contrast, transport costs exerted a hefty drag (-0.7 percentage points) as fuel prices fell 14.9% year on year and a further 1.1% month on month.
“The predominant driver of CPI food was meat and vegetables. However, we are not overly concerned about the recent pick up in food prices,” said Citi economist Gina Schoeman.
The print extends a run of benign headline readings that economists say is underpinned by deep fuel deflation, patchy consumer demand and slightly lower operating costs as infrastructure bottlenecks ease.
Jee-A van der Linde, chief economist at Oxford Economics, noted that SA is in the grip of a widespread outbreak of foot-and-mouth disease, “which intensified in June and will have an impact on domestic food prices going forward”.
“The latest data print does not alter our updated inflation outlook: we forecast inflation will average 3.4% in 2025 versus 4.4% in 2024,” Van der Linde said.
“Though headline inflation will drift higher throughout the second half of 2025 due to base effects, the overall outlook remains benign and unchanged from our earlier views. That said, several risks have emerged recently that could lead to faster-rising prices.”
Stanlib chief economist Kevin Lings noted that inflation had been confined between 2.7% and 3.2% for the past eight months. Though such stability would normally encourage the Reserve Bank to cut interest rates, “the timing of a meaningful reduction in SA’s inflation target remains unclear, which together with the escalation of the Israel-Iran conflict and potential further rises in the international oil price, is likely to encourage the Bank to maintain a cautious approach to any further changes in monetary policy”.
The Bank’s next monetary policy committee meeting is in July. Another risk it is likely to consider is the possible return of tariffs under US President Donald Trump.
Though SA has been benefiting from “numerous positive factors” — including a year-on-year decline in fuel prices, subdued food inflation, a reasonably strong currency, deflationary pressure from China and a weak housing market — Stanlib expects inflation to return to about 4.5% over the next 12 months as some of those factors become less supportive.
“This is still a good outcome when measured against the midpoint of SA’s inflation target, but not necessarily all that welcome within the context of the Reserve Bank’s quest to anchor SA’s inflation rate at about 3%,” Lings said.
Schoeman said Citi expects an announcement regarding the inflation target in the third quarter, though “the timing does involve the approval from National Treasury”.
Citi sees “a lower inflation target as a positive outcome, but the risk will be if significant supply shocks impact the trajectory and the Bank’s reaction function,” she said.
“We expect one more 25 basis-point rate cut in July ... if the inflation target is lowered in the near future we will revisit this outlook.”
Update: June 18 2025
This story includes additional comment from economists
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