South Africa’s inflation remains unchanged at 2.8% in May 2025, continuing the trend of low inflation for the third consecutive month. This has sparked a range of opinions among economists regarding future trends. While inflation is well below the South African Reserve Bank’s (SARB) target range of 3% to 6%, concerns around food prices and global commodity fluctuations could still impact the economy in the coming months.
Key Insights on South Africa’s Inflation Remains Unchanged at 2.8%
The inflation rate for May 2025 is in line with analysts’ expectations, and it highlights a sustained period of low inflation that is largely unaffected by volatile price increases in areas like energy or transport. The rate of 2.8% is consistent with April’s figures, confirming the underlying stability of the economy at least for now. However, economists are divided on the outlook for the second half of the year.
Food Prices Impacting Inflation
Despite the overall stability in the inflation rate, food prices, especially meat, have started to exert upward pressure on the Consumer Price Index (CPI). In particular, the prices of products like chicken and beef saw notable increases, pushing some categories of food beyond their typical price range. According to data from Statistics South Africa, food and non-alcoholic beverages rose by 3.5% year-on-year in May.
However, the increase in food prices has been somewhat offset by a decrease in the prices of durable goods, such as household furnishings and appliances. These sectors have seen a decline in prices, which has helped moderate inflation, despite food price hikes.
SARB’s Monetary Policy Response
The South African Reserve Bank (SARB) has responded to the low inflation environment with cautious optimism. In late May 2025, the SARB reduced its key interest rate by 25 basis points to 7.25%. This move is seen as a signal that the bank is confident that inflation is under control and that South Africa’s economy is not facing imminent inflationary pressures.
In a statement, SARB Governor Lesetja Kganyago indicated that the central bank is focused on maintaining inflation within its target range of 3% to 6%. With the inflation rate currently at 2.8%, there is a sense of relief among policymakers, who have been able to ease monetary policy without risking a sharp rise in prices.
What Economists Expect Next
Economists have varying predictions for South Africa’s inflation rate in the latter half of 2025. Miyelani Maluleke, head of South African macroeconomics at Absa, has warned that risks still exist. In particular, rising food prices, the ongoing energy crisis, and increasing oil prices could all lead to higher inflation in the months to come. Maluleke emphasised the potential for these factors to offset current price stability and warned that inflation could rise in the second half of the year.
On the other hand, Casey Sprake, an economist at Anchor Capital, suggests that inflation may remain subdued for the rest of the year. She pointed out that the SARB’s monetary easing, coupled with ongoing declines in the prices of durable goods, may help to maintain a low inflation environment. However, she also acknowledged that the uncertain global economy, with its potential for commodity price fluctuations, could present challenges for inflation control.
The Road Ahead: Inflation Outlook for South Africa
Despite the relatively stable inflation rate in May, economists remain cautious about the potential for external and internal pressures to push prices higher. In particular, geopolitical tensions, such as ongoing energy price shocks, as well as the unpredictable cost of food, could quickly alter the economic landscape. That said, the outlook for inflation in South Africa for the year 2025 remains relatively optimistic, with most economists forecasting an average inflation rate of 3.4%, down from 4.4% in 2024
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In conclusion, while inflation in South Africa remains steady at 2.8% for May 2025, the nation’s economic outlook remains uncertain due to rising food prices, energy costs, and global market volatility. The SARB’s decision to lower interest rates may help to stimulate growth, but risks remain. For now, South Africa can take comfort in the fact that inflation is contained, and the economy has not yet faced the severe price pressures seen in other parts of the world.