South African inflation forecast to rise above 4.5% on fuel costs
Economists predict March inflation near 3% before oil price surge and rand weakness drive increases through 2027.
South African inflation forecast to rise above 4.5% on fuel costs
Economists predict March inflation near 3% before oil price surge and rand weakness drive increases through 2027.
South Africa's consumer price index is expected to show inflation of approximately 2.9% year on year in March when Statistics South Africa releases data on Wednesday, according to Investec economist Lara Hodes1. The forecast represents a slight decline from the 3% recorded in February1.
The March figure is anticipated to precede a sharp acceleration in inflation beginning in April, driven by higher global oil prices and rand depreciation stemming from conflict in the Middle East12. Fuel prices in South Africa are calculated based on the previous month's movements, meaning the effects of recent oil market turbulence will appear in April's consumer price index, which Hodes projected would rise 1% month on month and 3.6% year on year1.
Fuel carries a 4% to 5% weighting in the consumer price index basket, but its impact is often amplified because South Africa imports most fuel products, making the economy vulnerable to international price volatility and exchange rate fluctuations1.
Economist Daan Steenkamp forecast that inflation would exceed 4.5% within the next 12 months and continue rising above 5% by early 20272. Steenkamp attributed the projected increases not only to external oil price pressures but also to what he characterized as overly optimistic Reserve Bank projections that render monetary policy more accommodative than conditions warrant2.
Steenkamp's modelling indicated that headline inflation rises 0.3 percentage points in response to a 10% increase in the dollar price of oil over the long term, with higher impacts when oil price increases coincide with exchange rate weakness or supply chain disruptions2. The rand depreciated sharply in March2.
The South African Reserve Bank declined to cut interest rates in February despite the inflation slowdown, warning of possible rate increases later this year due to anticipated elevated price pressures from oil market turmoil1. Market expectations now include at least a 50 basis point increase in the bank rate this year2.