In line with consensus estimates, South African headline inflation increased to +3.2% y/y in January from +3.0% y/y in December. This marks the third straight month of moderate upticks in the CPI from a low of +2.8% y/y in October last year.

Note that January’s print is the first release following Stats SA revisions to the CPI weightings. There were no significant changes to the weights of key inflation categories, but ‘food’ was assigned a slightly higher representation, while ‘transport’ now has a marginally lower weight within the index.

Regarding January’s inflation, a notably less deflationary ‘fuel’ reading (-4.5% y/y from -10.2% y/y in December), amidst rising fuel prices, drove the further acceleration in the latest headline reading.

In contrast to fuel’s higher reading, ‘food’ inflation remains very low at only +1.5% y/y in January from +1.7% y/y in December. Results in most other CPI categories were mixed.

Finally, core inflation, which excludes volatile food and energy prices, slowed to +3.5% y/y in January from +3.6% y/y in December).

Why does it matter
South Africa’s headline inflation continues to rebound after bottoming out in October 2024. However, the gradual pace of rebound is welcome, and inflation remains near the lower bound of the SARB’s 3%-6% target range.

Amidst only moderate CPI increases, we still expect the SARB to cut rates once more later in the year, although much depends on what interest rate changes (if any) the US Fed makes.

Looking ahead, inflation is likely to accelerate further throughout 2025. Fuel prices continue to rise, albeit at a more moderate pace, and electricity costs are set to increase in April.