South Africa's consumer price inflation rose to 3.5% year-on-year in July, driven to its highest level since September 2024 by higher food and fuel prices though still within the central bank's target range.
Source: Reuters.
The increase from June's 3.0% reading matched economists' expectations.
Food and non-alcoholic beverages inflation ticked up to 5.7% year-on-year in July from 5.1% in June, while fuel prices edged higher after four months of deflation, the statistics agency said on Wednesday, 20 August 2025.
Annual core inflation, which excludes volatile items such as food and energy, stood at 3.0%, slightly below analysts' forecasts of 3.1% and remaining within the central bank's 3% to 6% target range.
Inflation has been well under control, allowing the South African Reserve Bank (Sarb) to cut interest rates at three of its four policy meetings so far this year.
Last month the Sarb cut its main lending rate by 25 basis points to 7.00% and signalled a shift towards a lower inflation goal of 3%, down from the current 4.5%. The finance minister has yet to sign off on the change.
Any sustained uptick in the cost of staples could force the central bank to start raising rates to achieve a lower inflation target, analysts said.
"Rising costs in essentials like food and utilities could make achieving a lower target difficult without significant policy interventions which may require (the) Sarb to begin increasing rates at some point," said Zain Vawda, market analyst at MarketPulse by OANDA.
Lower target
Sarb Governor Lesetja Kganyago has consistently called for a lower inflation target, saying the current range is too wide and undermines the competitiveness of Africa's largest economy.
Finance Minister Enoch Godongwana, who is responsible for setting the official inflation target, said earlier this month that further consultation was needed and ruled out announcing a new target in the mid-term budget expected in late October.
Economists said the Sarb's push for a lower target could be challenging in the short-term.
"Combined with uncertainties around tariffs, the timing of this move feels somewhat misplaced," Vawda said.
The Sarb's next interest-rate decision is scheduled for mid-September. Johann Els, chief economist at Old Mutual, said he expected rates to remain unchanged while the central bank focuses on guiding inflation towards its preferred 3% target.
