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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
March 20, 2025

Consumer Inflation

February 2025

In February 2025, the Consumer Price Index (CPI) held steady at 3.2%, mirroring January’s figure and slightly below the anticipated 3.3%.

This stability was largely due to specific sector increases:

  • Housing and Utilities: Rose by 4.4%, contributing 1.0 percentage point.
  • Food and Non-Alcoholic Beverages: Increased by 2.8%, contributing 0.5 percentage point.
  • Restaurants and Accommodation Services: Climbed by 4.6%, contributing 0.3 percentage point.

Year-on-year, goods inflation rose to 2.5% in February, up from 2.4% in January. Conversely, services inflation eased to 3.8% from 4.0% the previous month. Despite the modest pace of price increases, inflation continues to diminish household purchasing power, as reflected in declining general imports in South Africa.

Many households are increasingly reliant on short-term credit, heightening their exposure to interest rate shifts and price increases, despite the slower pace.

On the positive side, the Monetary Policy Committee (MPC) reduced the interest rate by 25 basis points in January 2025. Factors such as moderate inflation, sluggish Q4 2024 growth, improved and steady electricity supply, and positive market sentiment suggest that the South African Reserve Bank (SARB) might consider further rate cuts in 2025, assuming inflation expectations remain stable during the first half of the year. Additional rate reductions could alleviate financial pressure on consumers and boost medium-term demand.

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More Coverage

Producer Price Inflation

October 2025
In October 2025, producer price inflation rose to 2.9%, an increase from 2.3% in September. However, on a monthly basis, there was a slight decline in producer prices, down by 0.1%.

Retail Sales Performance

September 2025
Retail sales in South Africa rose by 3.1% in September, slightly exceeding market expectations of 3.0%, as anticipated by analysts for that month. This growth indicates a continuing recovery in consumer demand within the economy.

SARB Lowers Interest Rates as Stability Improves

The South African Reserve Bank (SARB) has taken a prudent and measured step by reducing its base interest rate from 7.0% to 6.75%, marking a significant moment in the country’s monetary policy trajectory. This decision, made by the Monetary Policy Committee (MPC), underscores the bank’s cautious optimism about South Africa’s economic outlook amidst a complex global backdrop.

Consumer Inflation

October 2025
In September 2025, the Consumer Price Index (CPI) saw a modest rise to 3.4%, slightly up from 3.3% in August, yet just below the analysts’ forecast of 3.5%.

Why Aluma does not Force an Interest Cut

Cautious Optimism Amidst Inflation and Reform Momentum
As the Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) prepares to announce its interest rate decision later this week, market watchers are closely divided between expectations of a modest cut and maintaining the status quo. With approximately 70% of economists foreseeing a 25-basis point reduction from 7.00% to 6.75%, the prevailing sentiment reflects confidence in economic stabilization. However, a significant proportion remain cautious, suggesting that the SARB may choose to hold interest rates unchanged for another month, given the current inflation trajectory and recent developments in fiscal discipline.
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