Inflation beats Reserve Bank target for another month

South Africa’s headline inflation rate edged higher by a fraction of a percentage point in April 2025, once again falling below the Reserve Bank’s target range.

However, this does not mean an interest rate cut is coming, with economists warning debt holders to expect the current hold on rates to last longer.

Headline CPI was recorded at 2.8% year-on-year in April, 0.1 percentage point higher than 2.7% year-on-year in March.

The month-on-month change between March and April was 0.3%.

The increase was driven by higher inflation in key categories like food and non-alcoholic beverages. Food NAB inflation rose to 4.0%.

This was the highest annual rate since September 2024 (recorded at 4.6%), increasing by 1.3% from March.

According to Stats SA, the rise in Food NAB was due to higher meat prices, particularly beef productions like stewing beef, mince, and steak.

Meat prices increased by 2.3% on average between March and April, the highest monthly rise since January 2023 (2.5%).

Meat is the largest weighted group in the food & NAB category and accounts for 5.1% of total household spending, it said.

The price index for oils & fats increased by 1.4% between March and April, taking the annual rate to 4.8%. Cooking oil is 6.1% and brick margarine is 5.5% more expensive than a year ago.

Unfortunately for coffee lovers in South Africa, prices continue to outsrip most other categories, with hot beverages rising to 15.2%, the highest print since September 2024 (15.8%).

Instant coffee continues to record the highest rate within this category, with prices increasing by 20,2% in the 12 months to April.

Coffee prices are elevated across the globe. The World Bank commodity index for coffee beans (robusta) increased by 28.1% over the same period.

Alcoholic beverages & tobacco rose by an annual 4.7%, higher than the 4.1% increase in March. The monthly increase for the category cooled from 1.6% in March to 1.3%.

This likely reflects the continued impact of excise tax increases.

Consumers of these products should keep an eye on the new budget being tabled later on Wednesday, as economists have flagged possible further increases here.

Eyes on the Reserve Bank’s next move

While food prices are showing an uptick, this has been countered significantly by lower fuel prices.

South Africa has seen three months of consecutive fuel price cuts, with data for June showing another cut on the cards next month.

On average, fuel prices declined by 3.2% between March and April. Overall, motorists are paying 13.4% less for fuel than a year ago.

The price for a litre of inland 95-octane petrol softened to R21.62 from R22.34 in March. The average price for diesel eased to R21.94 from R22.80.

With inflation coming in below the SARB’s target range of 3% to 6%, this should bolster calls for the central bank to cut interest rates.

The SARB’s Monetary Policy Committee will meet next week to decide on its next policy move. Some economists say conditions are ripe for a cut – however, global uncertainties may keep the MPC on edge.

Another spanner in the works for rate cuts is a possible announcement on Wednesday lowering the SARB’s inflation target.

National Treasury is reportedly considering moving the target to between 3% and 5%. The SARB had previously called for a lower single target at 3%.

Should this announcement be made, rate cuts may be held back for much longer.

Investec chief economist Annabel Bishop expects the Reserve Bank to leave interest rates unchanged at its meeting this month, as it remains concerned over the high degree of uncertainty in the global outlook.

If the inflation target is dropped to a midpoint of 4.0% y/y, or even to 3.5% y/y, this would likely eliminate the chance of further interest rate cuts this year, she said.

This is because the SARB sees inflation at 4.5% y/y both next year and for 2027.

Even without lowering the target rate, hawkish and cautious central banks like the SARB may hold back on taking any policy action as they await the outcome of the 90-day pause on US president Donald Trump’s tariff war.