July inflation brings relief, but pressure points still expected ahead
· Citizen
South Africans have been given some much-needed breathing room, with inflation cooling sharply in July after hitting a two-year high the month before.
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But while the latest reading offers relief for households and businesses grappling with rising costs, the respite could prove short-lived, with fuel prices, utility costs and other persistent pressures still threatening the inflation outlook.
Statistics SA (Stats SA) said annual consumer price inflation was 4.3% in July 2026, down from 5.0% in June 2026. Consumer Price Index (CPI) was released on Wednesday, revealing an increase of 0.2% month-on-month.
Inflation cools in July
Tertia Jacobs, Treasury Economist and Fixed Income Specialist at Investec, told The Citizen that the headline inflation rate came in lower than expected in July, easing to 4.3% year-on-year from 5.0% in June.
She has attributed the decline to more contained food prices, smaller increases in administered prices such as electricity and water, and a sharp slowdown in fuel inflation.
According to Stats SA, food inflation declined to just 0.6%, while fuel inflation eased to 20.6% from 34.4% in June, following reductions in petrol and diesel prices during the month.
Will inflation increase in August?
Jacobs added that other measures also suggest inflationary pressures remain relatively contained, with trimmed-mean inflation easing to 3.1% and inflation excluding fuel moderating to 3.7%.
While she welcomed the July stats, she also added that it’s important to remain “cautious about reading this as the start of a sustained decline in inflation”.
“With oil currently trading at around $91 a barrel, petrol and diesel prices are likely to rise by around R1.00 and R3.00 a litre respectively in September, putting headline inflation on course to average around 4.7% in the fourth quarter – below previous estimate of 4.9%.”
Future remains uncertain
Jacobs said the future remains uncertain as there is still no clear prospect of the Strait of Hormuz reopening, and oil-price forecasts have been revised higher for longer.
Now to the South African Reserve Bank (Sarb) – inflation is still higher than the central bank’s target of 3%, and a little over the one percentage point tolerance band.
Jacobs said it may need to reassess its oil price assumptions, which project Brent crude to average $82/bbl in 2026, and revise its July inflation projections upwards.
“Nevertheless, the Sarb’s adverse scenario – based on oil at $100 per barrel and inflation remaining above 5% for an extended period – does not currently represent our baseline, especially following July’s downside surprise (which would have been the case if the outcome had been in line with our forecast).
“The possibility of a 25bp rate increase in September remains material, but our assessed probability has declined to 50% based on the latest information.”