SA Inflation Just Hit a 4-Year Low – Is a Rate Cut Now Inevitable? | PPS Investments

Published Date: 04/23/2025
Source: By Reza Hendrickse, Portfolio Manager at PPS Investments

---

The consumer price index (CPI) edged 0.4% higher in March, but the year-on-year number decelerated to 2.7%. This is the lowest annual rate of inflation since 2020 and taken at face value should be enough to justify a cut at the next MPC meeting at the end of May.

The primary contributors to the annual inflation rate were housing and utilities (4.4% and accounting for 1.0%), food and non-alcoholic beverages (2.7% and contributing 0.5%), and restaurants and accommodation services (4.2% and contributing 0.3%).

With CPI currently below the bottom of the SARB’s historic target range, and well below the mid-point, inflation is clearly not a problem in SA. Electricity is the only component of the CPI basket, which is and will remain a problem, given persistent above-inflation increases.

Inflation is unlikely to remain sub-3% going forward, and this could be something the MPC flags next month, in addition to significant global risks. There is also the issue of the planned VAT hike which will add marginally to inflation. Reuters polls suggest CPI will end the year between 4% and 5%.

Inflation has been a hot topic globally in the wake of Trump’s tariff war, prompting both the US Federal Reserve and the IMF to prominently raise concerns recently around the potential impact on both global economic growth and inflation.

Although the situation remains fluid as posturing and negotiations continue among countries, we do expect some impact on both global growth and inflation. The impact on SA will be relatively muted however, and probably not enough for the SARB to be overly concerned about delivering the one or two more cuts that the market is currently expecting.