South Africa’s headline consumer inflation slowed to 3.5% year-on-year in January, according to data released by Statistics South Africa on Wednesday, February 18, 2026.
The figure represents a slight easing from the 3.6% recorded in December 2025, though it was marginally higher than the 3.4% anticipated by economists. The moderation in price increases aligns with the South African Reserve Bank’s (SARB) expectation that inflation peaked at the end of 2025 and is now trending towards the new 3% target.
A key driver of the cooling inflation was a significant drop in transport costs, which reversed a four-month trend of increases. Fuel prices fell sharply, declining by 3.4% due to lower global oil prices and a strengthening rand. This resulted in a contraction of fuel costs year-on-year, falling to -3.7% after four consecutive months of increases. Private transport operation costs also decreased by 1% year-on-year, and inflation for new vehicles eased from 0.8% to 0.7%. Transport costs contracted by 0.2% year-on-year, compared to a 1% rise previously.
Despite the easing, economists at Nedbank cautioned that the overall inflation picture may pick up in the coming months due to base effects and potential risks surrounding fuel and food inflation. They anticipate inflation peaking around 3.7% before the SARB’s target is achieved.
Fuel prices are expected to remain a primary factor influencing CPI in the near term, with fuel inflation likely to remain “sticky” in the first quarter. Petrol prices experienced substantial cuts in January (65 cents per litre) and February (another 65 cents per litre). The February inflation print, to be published in March, is expected to reflect a similar contraction for fuel. However, economists note that rising global prices linked to increased winter demand in the Northern Hemisphere could reverse this trend in the second quarter, potentially pushing inflation higher. Current indications suggest a flat outcome for March petrol prices, with diesel prices set to rise by 45 cents per litre.
While fuel prices offer relief, food prices remain a pressure point. Food and Non-Alcoholic Beverages (Food NAB) inflation has remained stable at 4.4% year-on-year, but meat prices are a particular concern. Double-digit inflation in meat prices has been attributed to outbreaks of Foot and Mouth Disease and other animal diseases impacting livestock, with these pressures expected to continue at least through April 2026.
Electricity and water tariffs are also expected to contribute to upward pressure on production and operating costs. Energy regulator Nersa has approved tariff hikes for Eskom, which will see electricity prices increase by close to 9% in April and July.
Nedbank anticipates that a stronger rand will help to subdue import costs, keeping overall inflation in check. The group forecasts an average inflation rate of 3.4% in 2026, declining to 3.1% in 2027. This outlook supports expectations of potential interest rate cuts by the SARB later in the year, with Nedbank anticipating two 25 basis point cuts in May and July. Other analysts suggest cuts could begin sooner, with two 25 basis point reductions in March and July.
