Inflation creeps up again in January, as expected

The inflation rate crept up again in January after starting to increase since November after falling dramatically in October by 1%.

Statistics SA announced on Wednesday morning that the inflation rate for January was 3.2% in January compared to a year ago, up from 3% in December 2024. Inflation increased by 0.3% in January compared to December.

The main contributors to the 3.2% annual inflation rate were:

• housing and utilities that increased by 4.5% and contributed 1.1 percentage points
• food and non-alcoholic beverages that increased by 2.3% and contributed 0.4 of a percentage point, and
• restaurants and accommodation services that increased by 4.9% and contributed 0.3 of a percentage point.

In January, the annual inflation rate for goods was 2.4%, up from 1.9% in December, while for services, it was 4%, down from 4.2% in December.

ALSO READ: SA inflation rate remains favourable despite fuel price hikes

What does the new inflation rate mean for the repo rate?

The inflation rate of 3.2% is still within the inflation target of the South African Reserve Bank (Sarb) of 3% to 6% and will be considered when the Sarb’s Monetary Policy Committee (MPC) decides on the repurchase (repo) rate that will be announced on 20 March.

South Africa’s inflation rate moved below 3% for the first time in over four years in October, when it decreased to 2.8%. Despite calls from economists then to cut the repo rate by 50 basis points, the Sarb only cut the repo rate by 25 basis points in November and again by 25 basis points in January.

Sarb Governor Lesetja Kganyago has warned US President Donald Trump’s increases in import tariffs will drive up inflation in the US as well as in South Africa.

Many economists expect at least one more repo rate reduction this year, but the markets are not expecting more repo rate cuts.

ALSO READ: Consumers warned against taking on more debt despite third repo rate cut

The new inflation basket

Statistics SA reshuffled the basket of goods and services used to measure consumer inflation last month. The products in the basket are updated periodically to better reflect shifts and trends in consumer spending, while product weights are also adjusted.

The new inflation basket contains 71 new products, while 53 products were removed and 29 products were reorganised through merging, splitting or reclassification. There are now 391 products in the basket, down from 396.

The new food products added to the basket include basmati rice, meat bones, meat patties, chicken nuggets and ready-made meals. Ready-mix flour, flavoured milk, frozen potato chips and ground coffee/coffee beans were removed.