Thebe Mabanga
South Africa’s inflation rate is expected to peak at about 5% in June before easing in the second half of the year, potentially allowing the South African Reserve Bank to pause its rate-hiking cycle at its July meeting, according to Nedbank.
This is the view of Nedbank in the wake of the release of the latest inflation figures.
Stats SA reported on Wednesday that annual consumer price inflation rose to 4.5% in May, from 4.0% in April, reaching its highest level since July 2024, when inflation was 4.6%.
The increase is due to high fuel prices which have been driven by higher oil prices because of the war between Iran and the United Sates, with Israel no longer directly involved.
Stats SA noted that transport costs surged from 4.9% year on year to 9.4% due to higher fuel prices.
Nedbank noted that over the month, fuel prices increased by 14.3% as the Strait of Hormuz blockade kept global oil prices high.
Consequently, fuel inflation jumped from 11.4% to 28.7%, the highest since October 2022. Inflation for private transport operations also surged from 9.7% to 21.8%.
It now all hinges on a peace deal that threatens to unravel before it’s signed on Friday in Geneva, with United States President Donald Trump’s signature already attached.
Iran has sought to force through conditions to cover Israel’s attacks on Lebanon, even as Israel has said it is not bound by the deal, while United States Defence Secretary Pete Hegseth has said the US will resume military operations if Iran does not comply.
Nedbank expects prices to remain high even when the Strait of Hormuz reopens as recovery lags by weeks, even months.
“We expect inflation to rise further to close to 5% in June, driven by higher fuel prices, before receding in the second half of the year. The moderation will reflect easing oil prices following the opening of the Strait of Hormuz and continued food disinflation,” said Nedbank.
“Given the improved inflation trajectory, we expect the South African Reserve Bank (SARB) to pause its rate hiking cycle in July.”
A piece of good news from inflation figures is that food inflation is moderating as the spread of foot-and-mouth disease is easing, even as the minister responsible, the DA’s John Steenhuisen, will possibly be removed for apparently bungling the crisis.
“Encouragingly, food inflation continued to moderate, easing from 2.8% to a 14-month low of 1.6%,” said Nedbank.
The bank said moderation was broad-based among the food categories. Most of the downward pressure came from meat. “Meat prices slowed from 9.4% year on year to 7.3%, reflecting progress in foot-and-mouth disease vaccinations and the impact of increased imports,” the bank said. Cereals, fruit, and vegetables benefited from good weather.
Housing and utilities inflation rose from 5,2% to 5,3%, driven by electricity costs, as an 8,76% Eskom tariff increase came into effect in April.
Core inflation, which excludes food and fuel, rose from 3.6% to 3.8%
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