South Africa’s consumer inflation edged up slightly in December, closing the year at 3.6% (up from 3.5% in November) and bringing the annual average for 2025 to 3.2% — the lowest since 2004 and well within the Reserve Bank’s official target of 3%, with a tolerance band of plus or minus one percentage point. The 2025 average of 3.2% also came in below the Bank’s forecast of 3.3%, Stats SA data on Wednesday showed. “The 3.2% [level] is the lowest we’ve seen in 21 years, so that is encouraging and in line with the Reserve Bank changing its target,” said Citadel chief economist Maarten Ackerman.
The official 3% inflation target was adopted during the 2025 medium‑term budget policy statement in November. Headline inflation has largely been driven by rising costs in housing and utilities, food, and financial services. This uptick comes despite upward pressure from food items such as meat, which saw a 12.6% surge over the year — the highest among food items — and electricity and water tariffs, which remain key contributors to inflation.
Notably, durable goods prices declined further, falling 1.6% year on year, led by steep price cuts in household furnishings and appliances. “Updating our model with this print suggests that headline inflation will soften over much of this year, starting with a deceleration to below 3.5% year on year in January,” FNB economists noted. “This will be supported by the fall in fuel prices, while food and core inflation could be relatively stable.
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“As the year progresses, projected growth in the oil market surplus and a supported rand should keep fuel prices contained while also extending to overall imported, transport, and food costs.” According to the bank, the current downward pull on cereal and vegetable prices presents downside risk to food inflation in the near term: “In line with this, we note the risk that goods inflation is softer than anticipated.” While headline inflation nudged up, core inflation — which strips out volatile food, fuel and energy prices — remained subdued at 3.3%, reflecting weak underlying demand in the economy. This softer core trend aligns withdata from the Bureau for Economic Research (BER), which showed that inflation expectations for 2026 and 2027 have declined to record lows of 3.8% and 3.7%, respectively — the lowest since the BER began publishing its survey in 2011. Stable inflation expectations, which are closely monitored by the Reserve Bank, support the view that there is room for interest rate cuts later in the year.
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