June 2025 CPI update

SOUTH AFRICA'S inflation rate rose slightly to 3% in June 2025, from 2.8% in May. The main reason? Transport prices didn’t fall as much as before. However, core inflation actually dropped, and rents remain low.

- SANISHA PACKIRISAMY and TSHIAMO MASILE

What it means for interest rates

SANISHA PACKIRISAMY and TSHIAMO MASILE

Despite the uptick in headline inflation, as reported by Statistics South Africa (Stats SA), local inflation remained contained. However, July's fuel and municipal tariff hikes are likely to push inflation higher in July.

Because inflation expectations are somewhat influenced by past inflation, renewed price pressures could limit the impact that the SA Reserve Bank’s (SARB) 3% inflation target scenario could have in guiding inflation expectations lower, for now.

While technical work on lowering the inflation target has been completed, the decision now lies with the Finance Minister, and timing remains uncertain. However, without a lower target, the SARB has flagged limited room for deeper cuts in the near term.

Rental inflation remained subdued

Stats SA reported an acceleration in headline inflation from 2.8% y/y in May 2025 to 3% y/y in June. Seven of the 13 main inflation categories registered a higher inflation rate, inflation in four decelerated, and inflation in two was unchanged. The biggest contributor to higher inflation was the smaller drag from transport prices.

On the other hand, underlying inflation moderated with core inflation declining from 3% y/y in May to 2.9% y/y in June. This was predominantly due to lower insurance inflation (7.9% y/y from 8.2% y/y).

June is one of the highest survey months, as Stats SA surveys an additional 20% of the inflation basket outside of the monthly surveyed items.

The bulk of the additional items surveyed include actual rentals for housing (weight: 4.37%) and owners' equivalent rent (weight: 11.16%). These housing inflation components have tracked below their respective long-term averages since the COVID-19 pandemic.