South African inflation ticks up but more rate cuts expected this year
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South African inflation rose slightly in December, broadly in line with expectations, but economists said they still anticipate several interest rate cuts this year as underlying price pressures remain well contained.
Headline consumer inflation increased to 3.6% year on year in December from 3.5% in November, matching the median forecast in a Reuters poll, while average inflation for 2025 was 3.2%, the lowest in 21 years, Statistics South Africa said. Core inflation, which strips out volatile items such as food and energy, was 3.3% in December, also in line with forecasts.
At its last policy meeting in November, the South African Reserve Bank cut its main lending rate by 25 basis points to 6.75%, and its next rate decision is scheduled for Jan. 29. The modest uptick in inflation keeps the headline rate within the tolerance band around the central bank’s 3% target.
Elna Moolman, Standard Bank’s head of South Africa macroeconomic research, said real rates remain relatively high and the inflation outlook is improving, leaving scope for further easing, with a cut possible at one of the next two policy meetings and odds slightly tilted toward January rather than March. Independent economist Elize Kruger said a stronger rand than in November and falling inflation expectations also support the case for another 25-basis-point cut next week.
Statistics South Africa said the main contributors to the marginal rise in December inflation were housing and utilities, food and non-alcoholic beverages, and insurance and financial services.
