The February reading of the consumer price index (CPI) was the lowest since June last year, when it was 2.2%, and it marks the third time in the past 12 months that it has fallen below the SA Reserve Bank’s mandated 3% to 6% target range. 

Notably, food inflation braked to 5.2% in February from a 12-month high of 6% in January, a welcome development as rising food prices take their hardest toll on the poor and the hungry, whose ranks have swelled in the wake of the pandemic and the economy’s 7% contraction in 2020. 

The data come ahead of the third and final day of the monetary policy committee’s (MPC’s) latest meeting, with SA Reserve Bank governor Lesetja Kganyago scheduled to make the rates announcement after 3pm on Thursday. 

Still, expectations are that the SA Reserve Bank – which slashed its key repo rate by 300 basis points last year, bringing the prime rate for consumers to 7% – will refrain from cutting as inflation is now widely expected to heat up in the autumn and winter months. 

“The CPI printed was largely as expected. But future risks will matter much more to the SA Reserve Bank. Of key interest is the SA Reserve Bank’s assessment of the inflation outlook, given higher oil prices globally and higher electricity tariffs,” Razia Khan, chief Africa economist at Standard Chartered Bank in London, told Business Maverick.

Oil prices have been rebounding after a spectacular collapse in 2020, and this has filtered into pump prices in South Africa. Stats SA said fuel prices in February rose 5.2% month on month, and while it was not reflected in this data, they spiked over 4% in March. And Eskom tariffs are set to climb around 15% from April. 

“This should be the lowest inflation will be for a long time. Pressures will definitely start to intensify from here onwards, and the MPC will still be very concerned about the second-round effects of higher fuel and electricity costs,” Pieter du Preez, senior economist at NKC African Economics, told Business Maverick. 

“Also, inflation is expected to be contained within the target range for now, so we don’t see the SA Reserve Bank raising rates this year,” he said. DM/BM