South Africa’s inflation slowed to the central bank’s target in February, aligning Africa’s most industrialised economy with a broader regional trend of easing price pressures—though fresh geopolitical shocks continue to dampen policy expectations.
Annual consumer inflation came in at 3.0% last month, down from 3.5% in January, marking the third consecutive monthly decline, according to data released by Pretoria-based Statistics South Africa on Wednesday.
The reading was slightly below the 3.1% median estimate of economists in a Bloomberg survey, reinforcing signs that price growth had stabilised before global risks intensified.
On a monthly basis, consumer prices rose by 0.4%, quickening from 0.2% in January.
The slowdown mirrors a broader trend across several African economies, including Kenya, Ghana, Uganda, Zambia and Zimbabwe, where price growth also moderated in February amid softer food costs and improved currency stability. Egypt stood out as an exception, with inflation accelerating to 13.4% from 11.9%, highlighting divergent pressures across the continent.
The latest data places inflation at the new 3% target set by South African Reserve Bank’s (SARB), a level that would ordinarily strengthen the case for further monetary easing.
However, policymakers are expected to remain cautious ahead of their March 26 rate decision as external pressures mount.
Oil shock complicate outlook
The inflation figures predate the escalation of conflict in the Middle East, which has triggered a sharp surge in global oil prices and renewed volatility in emerging market currencies.
Brent crude has climbed more than 40% since fighting began on February 28, trading at around $102 per barrel, while the rand has weakened significantly against the dollar.
“These data largely predate the war on Iran and the resulting spike in oil prices and the weakening of the rand, both of which will be inflationary,” said Elna Moolman, head of South Africa macroeconomic research at Standard Bank, in a note.
Rising fuel costs are also expected to feed through into transportation and agricultural inputs, including fertiliser, raising concerns about second-round effects on food prices.
This comes as the country grapples with an outbreak of foot-and-mouth disease, which has already placed upward pressure on meat prices.
Central bank governor Lesetja Kganyago had earlier indicated that currency movements tend to have a greater influence on South Africa’s inflation trajectory than oil prices alone, highlighting the importance of exchange-rate stability in shaping policy decisions.
In early trade on Wednesday, the rand appreciated to 16.62 against the dollar, up about 0.3% from its previous close amid expectations of softer consumer price growth in February. However, the recent gain has done little to sway market sentiment.
Underlying price pressures ease
Despite these risks, underlying inflation measures showed continued moderation. Core inflation—which sets aside volatile food and energy components—slowed to 3.0% year-on-year in February from 3.4% in January, although it rose 0.7% on a monthly basis.
Price pressures across both goods and services categories also softened. Goods inflation declined to 1.9% from 2.7%, while services inflation eased to 3.8% from 4.2%.
The main contributors to annual inflation remained housing and utilities, which rose 4.8% and added 1.1 percentage points, followed by food and non-alcoholic beverages at 3.7%, contributing 0.7 percentage points. Insurance and financial services increased by 4.7%, accounting for a further 0.5 percentage points.
Market reaction signals shifting expectations
Financial markets have already begun to price in a more cautious policy path. South Africa’s government bonds have come under pressure in recent days, with yields on the benchmark 10-year note rising sharply.
According to Bloomberg data, yields climbed by 36 basis points last Monday alone and have surged more than 90 basis points since the onset of the Middle East conflict—marking the steepest increase over a comparable period since the early stages of the Covid-19 pandemic in March 2020.
The sell-off reflects a reassessment of earlier expectations that the SARB would continue its easing cycle, having cut interest rates six times since September 2025. The central bank last held its benchmark repo rate at 6.75% in January.
While easing inflation has provided temporary relief to South Africans, the resurgence of global risks, particularly from energy markets, underscores the fragility of recent gains and the increasingly complex trade-offs facing policymakers.
