PPS Investments: CPI January 2025
Annual consumer inflation eased to 3.5% in January, from 3.6% in December, while prices rose 0.2% month-on-month. The print keeps inflation close to the newly adopted 3% target and reinforces the disinflation profile that policymakers are seeking to entrench.
The composition of this month’s release was broadly constructive. The main contributors to the 3.5% headline inflation rate remained housing (4.8% year-on-year), food and non-alcoholic beverages (4.4% year-on-year), and insurance and financial services (6.8% year-on-year). Below the surface, goods inflation fell to 2.7% (from 3.0%) while services held at 4.2%. ‘
At a category level, the key swing factor versus December was transport, which fell month-on-month and left the group slightly negative on an annual basis, driven by a sharp month-on-month decline in fuel. This helped offset firmer food dynamics, where overall, food rose month-on-month, with meat inflation particularly elevated.
From a policy perspective, today’s release aligns with the SARB’s recent messaging. The MPC left the repo rate unchanged at 6.75% at its latest meeting, emphasising a cautious, data dependent stance while highlighting progress in bringing inflation closer to target. Current data strengthens the case for a patient easing bias.
The institutional backdrop remains supportive. National Treasury’s formal endorsement of the 3% target framework has enhanced policy credibility and helped compress the inflation risk premium embedded in domestic rates. Governor Kganyago has reiterated expectations that inflation through 2026 should generally remain in the 3% region consistent with a structurally lower inflation regime.
Overall, todays print supports the narrative of sustained by uneven disinflation. Barring renewed currency weakness or commodity shocks, the balance of risks appears skewed toward moderation.
