South Africa’s headline inflation slowed for the first time in three months in November 2025, raising expectations that the South African Reserve Bank (SARB) may implement additional interest rate cuts next year. The easing of inflation comes as the central bank adopts a new, lower 3% target, signaling continued monetary accommodation for the country’s economy.

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Key Inflation Data for November 2025

According to Statistics South Africa, the headline consumer price index (CPI) rose 3.5% year-on-year in November, down from 3.6% in October. This marks a subtle slowdown in inflation, placing it comfortably within the 1 percentage point tolerance band of SARB’s newly announced 3% inflation target.

Economists had anticipated that inflation would remain steady at 3.6%, making the November figures a positive surprise.

Core Inflation Trends

• Annual core inflation, which excludes volatile categories such as food and energy, registered 3.2% in November.
• Categories like transport and recreation recorded slower price growth, while food and restaurants experienced modest increases.

William Jackson, Chief Emerging Markets Economist at Capital Economics, noted:

“The softer-than-expected headline inflation and weak core inflation give the Reserve Bank plenty of confidence that it can meet its new, lower 3% inflation target. We expect 100 basis points of cuts in the repo rate in 2026.”

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Implications for South African Monetary Policy

At its last rate-setting meeting, the SARB cut the main lending rate by 25 basis points, bringing the repo rate to 6.75%. The central bank cited an improved inflation outlook as justification for easing monetary policy.

A recent quarterly survey commissioned by SARB indicated that business leaders, trade union representatives, and analysts anticipate significantly lower inflation under the new 3% target, reinforcing the case for further rate cuts.

The next interest rate announcement is scheduled for January 29, 2026, and markets will be closely monitoring the SARB’s approach to stimulating economic growth while maintaining inflation within target.

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Broader Economic Context

The easing of inflation provides room for monetary stimulus at a time when South Africa’s economy faces challenges such as moderate growth, unemployment pressures, and global economic uncertainties. Lower interest rates could support business investment, consumer spending, and economic recovery in the coming year.

Economists suggest that the SARB’s proactive stance may also boost market confidence, attracting foreign investment and stabilizing the South African rand, which remains sensitive to inflation and interest rate expectations.

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Conclusion

South Africa’s slowing inflation in November 2025 sets the stage for further interest rate reductions in 2026, as the Reserve Bank works to achieve its new 3% inflation target. The combination of softer headline inflation, subdued core inflation, and expectations of continued easing suggests that the central bank will maintain a supportive monetary policy to foster economic growth.