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Frederick Mitchell, Chief Economist | Aluma Capital (Pty) Ltd
Frederick Mitchell
April 23, 2025

Consumer Inflation

March 2025

In March 2025, the Consumer Price Index (CPI) fell to 2.7% from 3.2% in February, under the 3.0% forecast.

This decrease was mainly due to:

  • Housing and Utilities: Up 4.4%, contributing a 1.0 percentage point.
  • Food and Non-Alcoholic Beverages: Up 2.7%, adding a 0.5 percentage point.
  • Restaurants and Accommodation Services: Up 4.2%, adding another 0.3 percentage point.

Year-over-year, goods inflation was 2.0%, down from 2.5% in February, and services inflation eased to 3.5% from 3.8%. Despite slower price increases, inflation continues to reduce household purchasing power across South Africa, leading many to rely on short-term credit, increasing their vulnerability to interest rate changes.

On a positive note, the Monetary Policy Committee (MPC) cut the interest rate by 25 basis points in January but maintained it in March. The Reserve Bank remains cautious about inflation and interest rates, especially due to the US-China tariff war’s potential impact on price stability. Factors like moderate inflation, slow economic growth, improved electricity supply, and positive market sentiment influence the Bank’s interest rate decisions. However, price stability is a primary concern, determining future interest rate cuts in late 2025.

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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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