Inflation set to hit 5% by year-end as fuel price hikes take hold, but it's not all bad news

Rising fuel prices are expected to push South Africa’s inflation rate towards 5% by year-end, although economists increasingly expect interest rates to remain unchanged in November.

South Africa’s inflation has been on an upward trajectory this year, with Statistics South Africa’s Consumer Price Index (CPI) averaging just over 4.0% year-on-year so far in 2026, up from 3.2% in 2025.

However, the recent spate of fuel price increases has pushed CPI inflation up to 4.5% year-on-year in September, and economists now predict that figure will rise to around 5% by year-end.

Investec chief economist Annabel Bishop expects the year-on-year CPI inflation rate to reach close to 5.0% in the closing months of 2026, as well as in January. However, the second quarter of 2027 is likely to see a significant drop in CPI inflation, to 3.0% by June. This is because the figures will be coming off a high base, given the fuel price inflation seen during the second quarter of 2026.

This projection is also dependent on fuel price increases being contained during the first half of next year.

Potentially good news for consumers is that expectations of further interest rate hikes have waned, with no rate hike expected at November’s Monetary Policy Committee (MPC) meeting, Bishop said.

PSG chief economist Johann Els and Old Mutual Wealth investment strategist Izak Odendaal have also predicted a rate hold next month, with the latter stating that another increase would be unnecessary, given that the fuel-driven spike is likely to eventually fade.

“Looking forward, much depends on the length of the ME war, and so the impact on oil and fuel prices for inflation in South Africa and globally. It is not expected to persist beyond a year, but should it be lengthier, inflation forecasts would be higher,” Bishop said.

While temporary fuel levy cuts are expected to provide some relief towards year-end, October’s R3.33 per litre petrol price increase is expected to add around 0.5% month-on-month to CPI.

On the upside, food price inflation has been subdued, running at about 1.0% year-on-year, with food production having benefited from the La Niña earlier this year. Meat inflation has also eased sharply following the containment of the foot-and-mouth disease outbreak.