SA inflation eases to 2.7% in March, signaling cautious optimism amid global uncertainty

South Africa’s annual headline consumer inflation rate softened to 2.7% year-on-year (y-o-y) in March 2025, marking the second consecutive month of lower-than-expected price growth and reaching its lowest level since mid-2020.

The figure fell below the Bloomberg market consensus of 3.0%, underscoring a sustained moderation in inflationary pressures.

According to Hugo Pienaar, Chief Economist at the Minerals Council South Africa, “The continued decline reflects both subdued domestic demand and the lagged impact of earlier monetary policy tightening, though global volatility remains a critical wildcard.”

Core inflation, which excludes volatile food and energy prices, edged down to 3.1% y-o-y in March from 3.4% in February.

Goods inflation slowed sharply to 2.0% y-o-y, down from 2.5% the previous month, while services inflation decelerated for the third straight month to 3.5% y-o-y.

On a monthly basis, headline CPI rose 0.4% from February to March, below the anticipated 0.6% increase.

Pienaar noted that the muted monthly rise was partly driven by a smaller-than-expected 0.2% uptick in food prices, though alcoholic beverages, housing, and education costs offset this trend.

Alcoholic beverages and tobacco prices surged 1.6% month-on-month (m-o-m), contributing 0.1 percentage points to the headline increase, as annual price adjustments took effect in March.

Further hikes are expected in April following sin tax increases outlined in the national budget.

Housing and utilities rose 0.5% m-o-m, reflecting modest annual rental growth of 2.9% and owners’ equivalent rent at 2.4%.

Education costs jumped 4.5% m-o-m, driven by annual surveys showing a 5.0% y-o-y rise in primary and secondary education fees and a 3.7% increase for tertiary institutions.

Looking ahead, the South African Reserve Bank (SARB) revised its 2025 inflation forecast downward to 3.6% in March, aligning with its expectation of 3.0% y-o-y growth for the first quarter.

Despite the benign outlook, the Monetary Policy Committee (MPC) held the repo rate steady, citing global tariff wars and commodity market uncertainties.

Pienaar cautioned that while the soft March data raises the likelihood of a rate cut in May, “the MPC’s decision will hinge on how external shocks—particularly oil prices, the rand’s trajectory, and consumer resilience—unfold in the coming weeks.”

The impending 0.5%-point VAT increase in May, announced in the budget, could also introduce fresh inflationary pressures, testing the durability of recent gains.