Consumer Inflation – December 2025

In December 2025, the Consumer Price Index (CPI) rose by 3.6% year-on-year, up from 3.5% in November and slightly exceeding analysts’ forecast of 3.5%. This increase was primarily driven by:

• Housing and Utilities: Increased by 4.9%, contributing 1.2 percentage points.
• Food and Non-Alcoholic Beverages: Rose by 4.4%, contributing 0.8 percentage points.
• Insurance and Financial Services: Increased by 7.0%, contributing 0.7 percentage points.

Year-on-year, inflation for goods saw a slight rise from 2.9% in November to 3.0% in December, while services inflation grew from 4.1% to 4.2%. Notably, the inflation rate for services has now surpassed the Reserve Bank’s upper limit of 4.0% within the new inflation target range. This sustained increase is continuing to erode household purchasing power in South Africa. As a result, many families are increasingly relying on short-term credit to maintain their consumption, rendering them more vulnerable to fluctuations in interest rates, currency values, and import prices, which can subsequently affect domestic prices.

During its November meeting, the Reserve Bank’s Monetary Policy Committee (MPC) decided to reduce interest rates by 25 basis points, lowering the prime overdraft rate to 10.25% in South Africa. The next MPC meeting is set for January 29, 2026, during which the latest inflation data and forecasts for 2026 will be assessed. The Reserve Bank is anticipated to remain vigilant regarding inflation, particularly after revising the inflation target range downwards from 3-6% to a target of 3%, with a permissible deviation of one percentage point in either direction. This cautious stance aims to maintain price stability amid ongoing economic uncertainties, including the 30% trade tariffs imposed by the US on South African exports. Such uncertainties may also influence the Rand’s exchange rate against the US dollar in the coming months, despite recent tariff concessions granted to specific sectors within the agricultural industry.

The South African Reserve Bank (SARB) may contemplate a further 25-basis point interest rate reduction, taking into account the relatively stable inflation rate—albeit slightly above the target—and a notably stronger Rand against the US dollar in January 2026, coupled with stable but slightly elevated international oil prices thus far.

The interest rate cuts implemented in late 2024 and throughout 2025, along with the recent reduction, are expected to stimulate demand by increasing households’ disposable income after interest payments, thereby supporting economic growth. This outlook aligns with StatsSA’s latest economic growth figure of 0.5% for the third quarter of 2025.

Despite this positive growth outlook, which slightly surpasses market expectations, the Reserve Bank remains cautious due to persistent global uncertainties. Factors such as inflation, the US-China tariff dispute, and potential further tariffs affecting BRICS nations could impact price stability. Future interest rate decisions are likely to consider moderate inflation within the new target band, sluggish economic growth, improvements in electricity supply, and positive market sentiment.

In conclusion, maintaining price stability and protecting the Rand’s value remain top priorities as South Africa navigates the early months of 2026, in light of current international developments and the uncertainty they have generated.