From Sanisha Packirisamy, Chief Economist; & Tshiamo Masike, Economist, at Momentum Investments
The sharp rise in April inflation reflects the impact of the Middle East conflict, particularly through higher fuel prices. Announced fuel price increases in May point to further upside pressure, likely pushing headline inflation above the South African Reserve Bank’s (SARB’s) upper tolerance band of 4%.
As such, we have revised our 2026 inflation forecast up from 4% to 4.3%. The higher headline inflation trajectory combined with rising core and services inflation, upside risks to food inflation and potentially higher inflation expectations from the first quarter level of 3.6%, given oil price movements since the previous survey, significantly raises the likelihood of an interest rate hike at the May Monetary Policy Committee (MPC) meeting to contain inflation pressures and protect purchasing power.
Read Momentum’s full CPI note here.
From Izak Odendaal, Economist at Old Mutual Wealth
April CPI jumped to 4.0%y/y, largely as expected, due to the jump in fuel prices. However, core inflation, which excludes food and fuel, also rose to 3.6%y/y, pointing to a degree of broadening out of inflationary pressures.
With more fuel inflation set to rise in the coming months, overall CPI inflation will probably peak at around 5%, up from 3% at the start of the year.
There is considerable uncertainty, however, since the Gulf War can escalate or de-escalate at any moment. Global fertilizer shortages and an expected strong El Nino suggest there is upside risk to food prices over the next 12 months.
Given its 3% inflation target, the Reserve Bank is likely to raise interest rates once or twice in order to ensure that inflation expectations don’t become unmoored. However, next week’s MPC meeting will be a close call since one can also make a strong argument for staying on hold. The policy rate was already elevated at the start of the year, and the rand has been relatively stable throughout.
From Sifiso Mkwanazi, Economist at Alexforbes
The effects of the Middle East war are beginning to show up in domestic inflation pressures. Headline consumer inflation accelerated markedly to 4.0% year on year (y/y) in April, from 3.1% in March. Persistently elevated, war-driven global oil prices pushed domestic transport inflation to an almost two-year high, making it the main contributor to the rise in inflation. This was partly offset by a further moderation in food inflation, while housing and utilities costs were largely stable. The inflation print was above our expected 3.8%, but in line with the Bloomberg consensus estimate of 4.0%. Among the 17 analysts surveyed, the highest forecast was 4.4%, well above the upper end of the tolerance band, while the lowest forecast was still above target at 3.7%.
Overall, we expect inflation to rise to 5% by mid-year and remain above the upper limit of tolerance band for the rest of 2026 to average 4.3% for the year (a 0.3ppt upward revision). The SARB will be worried about the deterioration to the inflation outlook, rising upward risks to food prices and the further drift in services inflation. As a result, we expect the Monetary Policy Committee (MPC) to hike interest rates by 50bps – taking the repo rate to 7.25% and the prime lending rate to 10.75% by year-end. We would not be surprised to see the first hike as early as the 28 May meeting.
Read Alexforbes’ full note here.
From Maarten Ackerman, Chief Economist at Citadel
Inflation increased to 4.0% year-on-year in April, up from 3.0% in March, broadly in line with expectations. The primary driver of this acceleration was a sharp rise in fuel inflation, which moved from -8.7% in March to +11.4% in April. Additional upward pressure came from insurance and financial services inflation, which increased from 4.6% to 5.7%.
Food inflation, in contrast, declined from 3.4% in March to 2.8% in April. However, this reprieve is unlikely to persist. Food prices are expected to come under renewed pressure in the months ahead, largely due to second-round effects stemming from heightened tensions in the Middle East and the associated increase in transport and logistics costs.
Looking forward, inflation is likely to accelerate further. A key contributor will be the near 30% increase in fuel prices over April and May, which will not only lift headline inflation but also filter through into broader price pressures over time.
Given this shift in the inflation trajectory and the rise in inflation expectations, the South African Reserve Bank (SARB) is unlikely to be in a position to cut interest rates in the near term. A more probable outcome is a hold, with the risk increasingly skewed toward further rate hikes in the second half of the year.
While one could argue that this is largely a supply-side shock, where higher interest rates have limited effectiveness in containing inflation, the SARB remains focused on anchoring inflation expectations. As such, it is likely to consider tightening monetary policy further to mitigate second-round effects and prevent sustained upward pressure on inflation.
From Reza Hendrickse, Portfolio Manager at PPS Investments
Annual consumer inflation accelerated sharply to 4.0% in April, from 3.1% in March, marking the largest monthly jump in the headline rate in over a year. Prices rose 1.1% month-on-month, the strongest monthly print since early 2024. The outcome was driven almost entirely by the long-anticipated transmission of the oil shock into pump prices, with the broader basket remaining relatively well behaved.
The composition tells a clear story of an external shock dominating an otherwise contained domestic backdrop. Transport contributed 0.7 of a percentage point to annual inflation, a swing of close to a full percentage point from March. Fuel inflation rose to 11.4% y/y, with prices up 18.2% month-on-month alone. This is the mirror image of the disinflationary tailwind that flattered prints through late 2025 and early 2026.
Beyond fuel, the picture is more nuanced. Food eased to 2.9% y/y, with meaningful disinflation in cereal products and fruit and vegetables, while meat inflation remains the conspicuous outlier. Services inflation edged higher to 4.6% from 4.2%, with stickiness concentrated in administered categories. Administered prices are still running well above headline inflation, reflecting structural rather than cyclical pressures.
From a policy perspective, the print complicates the SARB’s near-term decision making but does not derail the broader disinflation narrative. The Bank has consistently emphasised it will look through first-round effects of supply-side shocks. With the repo rate at 6.75% and real rates firmly positive, the SARB retains some optionality, but the bar for further easing has risen.
For investors, the April print signals headline reacceleration is a fuel story that should peak and roll off as base effects normalise, provided oil stabilises. A key risk worth monitoring is rand stability, where should the currency weaken materially from here, then the SARB’s patient bias could become harder to maintain. For now, we view April as a shock-driven spike rather than a regime change.
ENDS
