February CPI: Cooling inflation meets rising oil risk | Anchor

South Africa’s annual CPI cooled for a second straight month, easing to 3.0% year-on-year in February from 3.5% in January, the lowest reading since June 2025 and below the 3.2% consensus. On a monthly basis, headline prices rose 0.4%. Core inflation—excluding food and non-alcoholic beverages, fuel, and energy—also slowed to 3.0% YoY (+0.7% MoM) from 3.4%, its softest pace since 2021, signalling a broad-based moderation in underlying price pressures.

Inflation now sits at the SARB’s new mid-point

The latest print aligns with the South African Reserve Bank’s newly adopted 3% inflation target, with a 1 percentage point tolerance band (2%–4%), replacing the prior 3%–6% range. Striking the mid-point should help entrench lower inflation expectations and support longer-term growth. That said, February’s data capture conditions before a notable shift in the global energy backdrop late in the month.

What drove February’s CPI?

• Housing and utilities: Up 4.8% YoY, contributing 1.1 percentage points to headline inflation.
• Food and non-alcoholic beverages (NAB): Up 3.7% YoY, adding 0.7 ppts. Meat prices surged 12.2% YoY amid the foot-and-mouth disease outbreak, while fruit (-7.2% YoY) and vegetables (-2.7% YoY) remained in deflation.
• Insurance and financial services: Up 4.7% YoY, contributing 0.5 ppts.

Base effects also supported the softer headline number, including delays in some medical aid increases. Transport costs fell 2.1% YoY after a 0.2% decline in January, reflecting a sharper drop in fuel prices (-10.1% YoY vs -3.7% YoY previously).

Oil’s sharp rebound changes the near-term outlook

Since late February, heightened geopolitical risks have pushed oil markedly higher. Brent crude, which ended February near US$72/bbl, climbed to above US$110/bbl by mid-March. For South Africa—an importer of refined petroleum—such moves pass through quickly via the monthly fuel price adjustment. Higher fuel costs typically feed into transport and logistics first, with second-round effects often spreading to food, manufacturing, and services.

Household impact: fuel, transport and food

Amid an already tight cost-of-living environment, households are likely to feel higher energy costs in the weeks ahead. Current estimates point to a potential petrol increase of roughly R3–R4 per litre, with diesel possibly rising by more than R7.00 per litre. April’s fuel adjustment will also incorporate Budget 2026 fuel-related levy changes (carbon tax, the general fuel levy, and the Road Accident Fund levy), amplifying the price move.

Resilience vs. persistence: the key macro question

South Africa has weathered temporary shocks before, but a prolonged period of elevated oil prices would challenge the country’s fragile recovery. The critical variables are:

• Duration: How long elevated oil prices persist.
• Pass-through: The extent to which higher energy costs feed beyond transport into broader CPI categories, including food, services, retail and manufacturing.

If oil remains high, upward pressure on inflation could emerge just as policymakers seek to anchor expectations nearer the SARB’s 3% target. The next Monetary Policy Committee meeting on 26 March will take place against a more uncertain backdrop, with markets reassessing the balance between near-term inflation risks and growth considerations.

Policy and positioning

While the current environment does not resemble a systemic crisis, South Africa enters this period with comparatively stronger fiscal buffers and a more stable macro framework than in some past shocks. Even so, higher oil prices are likely to lift measured inflation in coming months, initially via fuel and transport and then potentially through broader second-round effects. Policymakers and investors will focus less on the initial spike and more on its persistence and diffusion through the economy.

Bottom line

February’s CPI offered encouraging confirmation that inflation had moved to the SARB’s new mid-point, with core measures also cooling. However, the subsequent oil price surge complicates the near-term path. Whether this proves a transient shock or a more durable headwind will determine the trajectory of inflation, real incomes, and policy over the months ahead.