CPI for April 2025
The annual consumer price inflation was 2.8% in April 2025, up from 2.7% in March 2025. The CPI increased by 0.3% month-on-month in April 2025.
The main positive contributors to the inflation rate were housing and utilities (4.4% and accounting for 1.0%), and food and non-alcoholic beverages (2.8% and contributing 0.7%). In April, the annual inflation rate for goods was 1.7%, down from 2.0% in March 2025, while the services inflation rate was 3.8%, up from 3.5%.
The Treasury and the central bank recently announced that they are engaged in the development of an appropriate inflation framework for South Africa. An announcement is expected soon, which has contributed to the rand’s appreciation and a decline in government bond yields. Governor Lesetja Kganyago has long argued that a 3–6% band is “too wide” and that a single-point target - around 3% - would better align with peer central banks and anchor expectations more tightly.
Economists surveyed by Reuters had forecasted a steady annual inflation rate of 2.7%, below even the lower bound of the 3–6% inflation target range. Running persistently below 3% puts downward pressure on expectations for rate cuts, since the SARB’s framework allows it to “look through” temporary dips but aims to anchor inflation expectations firmly within its band. A lower inflation target without an immediate reduction in nominal rates implies that real rates will stay higher for longer.
Higher real rates tend to attract capital, supporting both bond inflows and currency strength. Markets have reacted by sending the rand stronger and driving down government bond yields ahead of any formal announcement. With expectations now shifting toward a tighter inflation anchor, foreign investors may see reduced risk of surprise rate cuts and more predictable real returns on South African fixed income.
It remains to be seen whether this dynamic will encourage capital flows into government bonds, exerting downward pressure on yields while easing government funding costs. For now, investors are focusing on today’s budget speech will be an important event in boosting investor confidence is a key focus should provide a sense. However, if global or domestic disruptions push headline inflation sharply above 3%, the Reserve Bank may face a steeper trade-off between growth and price stability, signalling a more constrained policy stance should upside shocks re-emerge.
Alot depends on whether today’s budget speech inspires confidence, and whether global dynamics become more supportive of inflows into emerging market assets.
