Sanisha Packirisamy, Group Economist; and Tshiamo Masike, Economist; at Momentum Investments

Executive Summary

Statistics South Africa (Stats SA) reported a surge in headline inflation to 5% y/y in June from 4.5% y/y in May.

This was driven primarily by higher private and public transportation costs following the war-inflicted increase in fuel prices.

The collapse of the United States (US)-Iran ceasefire reignited oil market uncertainty.

Brent crude oil prices have risen close to US$95/bbl on a reignition of the war. Russia’s diesel export ban has tightened global diesel supply and increased the upside risks to local fuel prices.

Core and services inflation also accelerated in June, reflecting higher transport services costs.

The impact so far has been concentrated in transport-related categories. Further monitoring is needed to assess broader pass-through effects.

Inflation expectations for 2026 jumped from 3.6% in the first quarter survey to 4.4% in Q2.

However, medium-term expectations and wage growth expectations remained relatively well anchored. Persistent price pressures risk a further increase in longer-dated inflation expectations.

So what?

1. The magnitude in the acceleration in inflation in June was unexpected. The balance of risks has shifted to the upside following renewed US-Iran tensions and rising inflation expectations.

2. The likelihood of a 25-basis point interest rate hike at the July meeting has increased, although the Monetary Policy Committee (MPC) views could remain divided.

3. We expect inflation to average 4.2% in 2026 before moderating to 3.5% in 2027, although the outlook remains sensitive to geopolitical developments, the exchange rate and weather conditions.

You can read Momentum’s full note on the latest CPI figures here.

ENDS