Some economists expect inflation to remain subdued for first half of 2025

JOHANNESBURG - Some economists expect inflation to remain subdued for the first half of 2025, after rising a third consecutive time.

Statistics South Africa (Stats SA) released the inflation reading, showing that it rose marginally to 3.2% in January.

The release also marked the first set of data since Stats SA updated the basket of goods and services used to measure the change in prices.

The January reading was slightly better than market expectations.

Housing and utilities exerted the most pressure.

While food and non-alcoholic beverages slowed, the category still contributed half a percentage point to the overall increase.

The chief director of price statistics at Stats SA, Patrick Kelly, said: "We could look at particularly maize prices which jumped almost by 5% between December and January."

Core inflation, which excludes volatile food and fuel prices, held steady at 3.5% in what economists at Nedbank suggest that underlying price pressures remained well contained below the South African Reserve Bank (SARB)’s 4.5% inflation target.

Economists at FNB believe inflation is only likely to rise steadily in the second half of 2025.

"Risks to the outlook include a more robust normalisation in services inflation as well as a faster acceleration in administered price inflation, especially water services," says FNB’s senior economist Koketso Mano.

"In addition, any hike in the VAT rate would raise annual inflation. Furthermore, global policy uncertainty should weigh on emerging market currencies including the rand."