Best news about inflation in South Africa for over 20 years

South African inflation edged up slightly in December, but that’s unlikely to deter the Reserve Bank from cutting interest rates next week, as pricing pressures are expected to remain benign.

Throughout the year, “we expect” inflation for each one of the months to stay in the 3% range,” Governor Lesetja Kganyago said in a Bloomberg TV interview at the World Economic Forum in Davos, Switzerland earlier.  

“We think that inflation this year will average anything around 3.5%” and by 2027 it will converge toward “our new 3% target that then says that we still have room” to ease policy, he said.

Consumer prices rose an annual 3.6%, from 3.5% in November, Pretoria-based Statistics South Africa said Wednesday, averaging 3.2% for 2025.

That was below the central bank’s 3.3% forecast and the lowest rate in 21 years. In July, the bank indicated its preference to target inflation at 3%  — a goal that was formally adopted by National Treasury in November.

The lower-than-expected average, along with forecasts that price growth will stay subdued amid softer oil prices, a stronger rand and record-low inflation expectations, may prompt the central bank’s monetary policy committee to cut rates on 29 January.

Forward-rate agreements — used to speculate on borrowing costs — are pricing in at least two rate cuts this year, with a 36% chance that the first will come next week.

The yield on the 2030 government bond fell after the data, dropping seven basis points to 7.37% and the rand pared a gain of as much as 0.5% to trade 0.3% stronger at 16.37 per dollar as of 11:02 a.m.

The biggest contributors to inflation were housing and utilities, food and non-alcoholic beverages and insurance and financial services, at 4.9%, 4.4% and 7%, respectively.