South Africa’s Reserve Bank has signalled a striking macroeconomic development: inflation may fall to around 3 per cent in 2026, achieving this revised target ahead of earlier projections and potentially unlocking room for further interest rate reductions. Central bank Governor Lesetja Kganyago made this observation during discussions at the World Economic Forum in Davos, underscoring Africa’s emerging influence in global economic policy debates. This recalibration of inflation goals reflects both domestic resilience and broader shifts in emerging market policy frameworks at a time when many economies grapple with persistent price pressures.
South Africa’s recent inflation trajectory exhibits a palpable downward trend that has captured attention. Official figures show headline consumer price inflation eased to 3.5 per cent in November 2025, down from 3.6 per cent in October, and within the newly adopted tolerance band around the 3 per cent target. According to Statistics South Africa, the annual rate reflects broad-based moderation in price growth, albeit with important nuances beneath the surface. Transport-related costs and recreation categories decelerated, while food inflation, particularly meat prices, continued to exert upward pressure.
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Government statistics further illustrate that for the full calendar year of 2025, consumer price inflation averaged 3.2 per cent, the lowest annual rate in more than two decades. This is a significant change from South Africa’s historical inflation profile, where the annual average often ran considerably higher.
Recalibrating Targets: A Strategic Shift
In late 2025, South Africa made a decisive change to its inflation targeting framework by lowering the formal target to 3 per cent with a ±1 per cent tolerance band, a shift from the long-standing 3–6 per cent range. This adjustment was the first of its kind in 25 years and was intended to align South African monetary policy with more competitive international standards while supporting lower borrowing costs.
Analysts viewed the reduction as a strategic move to anchor inflation expectations more firmly and to create space for interest rate easing. Indeed, the Reserve Bank cut its main policy rate by 25 basis points to 6.75 per cent in late 2025, a signal that lower interest rates may accompany the lower target. Surveys conducted among business leaders, labour representatives, and economists following the target shift showed inflation expectations for 2026 and 2027 moderating significantly, reinforcing confidence that the revised framework could produce tangible results.
What Lies Beneath the Headline
A deeper look at the components of South African inflation reveals the layers that shape the headline figure. In November 2025, transport prices experienced subdued inflation, with used vehicle prices falling on an annual basis, while fuel contributed minimally due to price declines. Conversely, food and non-alcoholic beverages posted stronger inflation, rising at annual rates above the headline average, largely driven by meat price inflation reaching levels reminiscent of earlier years.
The moderation in overall inflation, despite pockets of higher price increases, reflects what economists call a diffusion of inflation pressures, where no single category exerts dominant upward influence across the board. This pattern provides central bankers with greater confidence that underlying inflation is not broadly accelerating, and therefore that the new target is sustainable without jeopardising financial stability.
Lessons for African Peers
South Africa’s policy recalibration offers several lessons for other African economies contending with inflation dynamics.
First, clarity and credibility of inflation targeting matter. Setting a clear, lower inflation goal and credibly signalling commitment to that goal can help anchor expectations. Surveys indicating downward revisions in inflation forecasts following South Africa’s target adjustment underscore this point.
Second, monetary policy space can be expanded without undermining price stability when inflation frameworks are aligned with real economic conditions. South Africa’s ability to cut rates amid subdued inflation illustrates the potential gains from well-calibrated targets in emerging markets.
Third, detailed statistics and transparent communication remain crucial. The availability of monthly CPI breakdowns, covering categories from transport to food and services, equips policymakers and markets with the granularity needed to assess underlying conditions and adjust policy appropriately.
The South African experience resonates beyond its borders because many African economies are navigating inflation transitions amid divergent global pressures. External shocks such as commodity price volatility, exchange rate fluctuations, and uneven global demand have complicated the inflation outlook across the continent. Against this backdrop, South Africa’s disciplined approach to inflation targeting, combining statistical rigour with adaptive monetary policy, offers a framework that could inspire similar adjustments in other economies seeking to balance price stability with growth imperatives.
From a global perspective, the Davos platform underscores that emerging-market inflation frameworks are no longer peripheral concerns but central to discussions on sustainable growth, financial integration and investor confidence. South Africa’s success in moderating inflation and recalibrating its policy anchors positions it as a reference point for peers and partners alike.
Navigating a New Inflation Landscape
South Africa’s journey towards a 3 per cent inflation target, grounded in recent data and anchored by credible policy adjustments, highlights a significant evolution in macroeconomic governance. For other African economies wrestling with inflation, volatility and economic growth pressures, it presents a model of precision, adaptability, and statistical depth.
As inflationary landscapes shift globally, the South African case emphasises the value of clear policy frameworks, robust data infrastructure and the nuanced interpretation of price dynamics. In doing so, it underscores a broader lesson for policymakers on the continent: that measured, credible inflation strategies can contribute meaningfully to economic stability and resilience in an increasingly interconnected world.
