The country will be watching the Reserve Bank’s repo rate decision with heightened anticipation, as economists warn that geopolitical tensions could push inflation higher after it reaches the new 3% policy target.
This week, the Bank’s monetary policy committee (MPC) meets to set the rate, with governor Lesetja Kganyago scheduled to announce the outcome on Thursday afternoon.
After the release of the official consumer price index (CPI) data for February, Stats SA’s head of price statistics, Patrick Kelly, said a huge part of the reason inflation cooled to 3% was that medical schemes delayed their price adjustments.
“This February’s monthly print was lower than average for the month, and we attribute this to three main factors.
“First, there was a delay in the implementation of some new medical aid rates. Most medical aid schemes increase prices at the beginning of each year and are surveyed by Stats SA in February. This results in higher than average monthly rates.
“In February 2026, however, not all medical schemes had adjusted their contributions. This delay resulted in a lower monthly change in the CPI than might otherwise have been the case.”
However, by the beginning of March, the US and Iran came to blows in an exchange of attacks that closed the Strait of Hormuz, which moves more than 20-million barrels of crude oil a day. Kelly said cereal products entered deflationary territory at -0.5%, down from 0.6% in January.
It is, however, no longer only the likely future impact of the external oil price shock on the economy but also the extent to which it will coincide with several domestic price increases on April 1.
— Prof Raymond Parsons, North-West University Business School
“White rice is 12.5% cheaper than a year ago, while spaghetti is down 0.5% and brown bread 0.1%.
Meat inflation eased to 12.2% from 13.5% in January. The monthly rate was -1.1%, the first decline in almost a year.
Beef products recorded large monthly price decreases, including beef offal, down 4%, and stewing beef, dropping by 3.7%.
Other meat products that were cheaper were pork, down by 1.6%; and lamb and mutton, lower by 1.4%.”
Kelly said prices of oils and fats declined 0.4% from January, and lower prices were recorded for margarine spread. Inflation for alcoholic beverages rose to 5.1% from 4.6% in January.
Independent economist, John Loos, said the SARB MPC is expected to keep interest rates unchanged when it announces its post-MPC meeting decision.
“The most likely outcome, I believe, is for the bank to keep its policy repo rate unchanged at 6.75%.
“Should this be the decision, it would be the 2nd consecutive unchanged rate decision, implying that further growth stimulus for the economy is lacking.”
He said some who may hope for a rate cut may point to the February CPI inflation rate having slowed, from January’s 3.5%, to 3%, which is exactly on the Bank’s target of 3%.
“However, the February CPI survey was undertaken by StatsSA prior to the onset of the US/Israeli-Iran conflict in the Middle East. As a result of this conflict, the inflation risk environment has changed dramatically.”
Tertia Jacobs, Treasury economist and fixed-income specialist at Investec, said the outcomes for both headline and core inflation surprised on the downside, driven by broad-based moderation in food prices across all categories.
“This included meat prices, which, while still elevated, recorded a month-on-month decline. In addition, medical aid inflation remained subdued, mainly due to Discovery’s tariff increases only coming into effect in April and, therefore, not yet reflected in the data.”
From here, inflation is expected to start rising, reaching around 3.3% in March. “A more pronounced increase is anticipated in April, driven by a significant petrol price shock.
The extent of this impact will depend on whether the government intervenes to reduce the fuel levy versus a full pass-through of the under-recovery.”
Prof Raymond Parsons of the North-West University Business School said the better than expected headline inflation of 3% in February was welcome but has now already been overtaken by a highly negative inflationary outlook.
“It is, however, no longer only the likely future impact of the external oil price shock on the economy but also the extent to which it will coincide with several domestic price increases on April 1.
Apart from the fuel price rises driven by international oil prices, there must now be added the adjustments to the fuel and Road Accident Fund levies, the carbon tax, as well as the Eskom tariff increases.”
Parsons said convergence of these factors on April 1 created the prospect of a concentrated cost shock for consumers and businesses. Oon present evidence, the outlook for headline inflation in 2026 as a whole is therefore now likely to average out at closer to 4%.”
Adriaan Pask, CIO at PSG Wealth, said while headline inflation remains above the US Federal Reserve’s 2% target, moderation in core inflation suggests that price pressures are gradually easing, but that energy price volatility and global trade risks continue to pose challenges.
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