This week Statistics SA released the February year-on-year inflation figures and the South African Reserve Bank (SARB) decided to maintain the repo rate at its current 7.5%. Accordingly, the prime lending rate remains 11%.

On the interest rate decision, law firm STBB commented: “This comes after three consecutive rate cuts, beginning in September 2024. Although global oil prices have declined and consumer inflation, which remained steady at 3.2% in February, is well below its mid-point target range of 4.5%, the SARB retained its characteristically cautious approach. Given global market uncertainty and the proposed looming VAT increase, however, the SARB’s circumspect stance is unsurprising.”

On the inflation figures, Casey Sprake, economist at Anchor Capital, said that despite overall inflation holding steady at 3.2% in February, consumers faced renewed pressure as food and non-alcoholic beverages inflation increased to a four-month high, rising to 2.8%, from 2.3% in January.

“This acceleration was primarily driven by a sharp increase in maize prices, with maize meal inflation reaching a 17-month peak. A prolonged regional drought constrained maize harvests, driving up demand from neighbouring countries and putting upward pressure on prices. However, recent rainfall has begun to ease supply concerns,” Sprake said.

Sprake cautioned that inflationary pressures were building. “In the first quarter of this year, survey respondents revised their inflation forecast for 2025 downward to 4.3% (from 4.5%), but they anticipate a gradual rise to 4.7% by 2027. Over the next five years, inflation is expected to stabilise at 4.7%, slightly above SARB’s preferred midpoint,” she said.

Sprake said there was still a possibility of a rate cut in May – barring any significant shocks that could weaken the rand. “A stronger rand could provide some relief to import costs, but persistent inflationary concerns, especially in food prices, will remain a key challenge for consumers in the months ahead,” she said.

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