Good news for inflation and interest rates in South Africa

South Africa’s inflation rate flatlined on the eve of the Reserve Bank’s MPC meeting to decide on interest rates tomorrow.

The consumer-price index rose 3.2% in February from a year earlier, the same as the previous month, Pretoria-based Statistics South Africa said Wednesday in a statement on its website. The median of 17 estimates in a Bloomberg survey of economists was 3.4%.

The reading will likely persuade the central bank’s monetary policy committee to leave its key interest rate at 7.5% following the conclusion of its meeting on Thursday, after three previous quarter-point cuts.  

The MPC will probably adopt “a wait-and-see approach, given the global uncertainty at the moment,” EY Africa Chief Economist Angelika Goliger said ahead of the release.

Since the committee’s last decision in January there has been a marked escalation in US President Donald Trump’s rhetoric and tariff measures against neighbors, allies and competitors alike.

What were unrealized threats a few weeks ago have now emerged as full-blown hindrances to commerce. 

The MPC will also be concerned by average inflation expectations in two years’ time — a measure it uses to inform its decision-making — edging up to 4.7% in the first quarter from 4.6% previously.

The panel prefers to anchor expectations at the midpoint of its 3% to 6% target range.

“The South African Reserve Bank could still implement a 25-basis point cut in the second half of 2025, aiming to support consumer demand amid a more benign inflation outlook,” Goliger said.

Forward rate agreements, used to speculate on borrowing costs, are pricing in a 28% chance of a 25-basis-point reduction at Thursday’s MPC meeting and a 100% probability of a cut of that magnitude by year-end.