Delivering the Monetary Policy Committee (MPC) statement recently, the bank’s governor, Mr Lesego Moseki attributed the decline primarily to the downward adjustment of domestic fuel prices on July 7, which shaved 2.3 percentage points off headline inflation.

Mr Moseki said despite the July drop, the MPC expected inflation to stay above the target range until the first quarter of 2027 due to persistent supply-side pressures, including high fuel costs and elevated electricity tariffs. 

He added that projections indicated that inflation would average 7.9 per cent in 2026 before easing into the target range at an average of 4.9 per cent in 2027.  

He also noted that risks to the inflation outlook remained tilted to the upside, mainly reflecting potential second-round effects stemming from higher domestic fuel prices and electricity tariffs. 

Other domestic factors adding to potential cost pressures, he said, included short-term food inflation tied to Foot and Mouth Disease (FMD) restrictions and weather risks from a potential El Niño pattern.

He further indicated that externally, elevated oil, gas and fertilizer prices linked to Middle East conflict continued to pose threats to price stability, while international food prices could rise above current forecasts. 

Again, he said heightened global trade tensions and tariff measures presented further upside risks.

However, he said inflation could settle lower than projected if domestic and global economic growth remained weak, fiscal space remained constrained or international commodity prices dropped unexpectedly. 

Mr Moseki emphasised that continued vigilance and careful management of inflation expectations were necessary to bring inflation back within the medium-term objective range. He also warned that broader external developments could raise the domestic cost of living and undermine the recovery of the global diamond market and ultimately dampening domestic economic performance. ENDS