Latest CPI inflation numbers open the door to a possible interest rate cut, economists say
Inflation is expected to continue to drop back to the 3% inflation target this quarter and then average 3.1% for the year as a whole.
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South Africa’s inflation rate ticked slightly lower in January 2026, offering modest relief for consumers but masking persistent price pressures in essential categories.
Data released by Statistics South Africa shows annual consumer price inflation at 3.5% in January, down from 3.6% in December. On a monthly basis, prices increased by 0.2%.
Given the lower year-on-year inflation rate, economists see room for a rate cut. Dr Elna Moolman, Standard Bank Group head of South Africa Macroeconomic Research, said the South African Reserve Bank has room to cut rates.
Annabel Bishop – Investec’s chief economist – noted that markets expect the South African Reserve Bank to cut interest rates by 0.25 percentage points in March, still in line with Investec’s view.
The central bank's next meeting is scheduled for 26 March.
Moolman said that this “data set generally reflects quite benign inflation pressure”.
Housing and utilities remained the single largest contributor to annual inflation, rising 4.8%. Food and non-alcoholic beverages followed, increasing 4.4% and contributing 0.8 percentage points.
Food inflation remains a key concern, particularly for lower-income households. Meat prices surged 13.5% year-on-year, significantly outpacing headline inflation.
By contrast, categories such as fruits and vegetables recorded annual declines, helping to temper the broader food basket.
Another recent publication from Statistics South Africa showed that a kilogram of beef rump steak rose from an average of R166.01 in December 2022 to R214.45 in December 2025 – an increase of 29%. That translates into nearly R50 more per kilogram.
Foot-and-Mouth Disease has been cited as one of the factors behind elevated meat inflation, which has placed strain on the food and non-alcoholic beverages segment of the consumer price index basket.
Moolman adds that “Foot-and-Mouth Disease is a persistent risk. However, we are encouraged by indications of vaccine procurement that should, in the coming months, provide some relief to this industry.”
Insurance and financial services continued to exert upward pressure, climbing 6.8% year-on-year.
Transport prices provided some relief. The transport index saw a 3.7% annual drop in fuel prices and a 3.4% monthly decrease. This helped offset increases elsewhere in the basket.
Administered prices – often a source of inflation volatility, as this includes costs such as Eskom – rose 3.7% annually but declined 1% on a monthly basis.
Bishop said inflation is expected to continue to drop back to the 3% inflation target this quarter and then average 3.1% for the year as a whole.
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