By Global inflation accelerated through the first half of 2026, driven primarily by Middle East conflicts that disrupted energy supplies, widened refinery margins, and pushed up transport and production costs. This supply-side shock has increasingly leaked into core inflation.
Compounding these pressures, looming El Niño weather patterns and fertilizer constraints threaten to prolong food-price risks globally.
While major central banks initially diverged in their monetary responses due to differing domestic conditions, they have since aligned around a synchronised tightening bias.
The Local Impact on South Africa
South Africa has not been immune to these international headwinds. Headline inflation rose from 3.2% in the first quarter of 2026 to 4.5% in the second quarter. Projections indicate inflation will remain elevated above 5% until the second quarter of 2027, before finally easing back toward the target band by the fourth quarter.
To combat these pressures, the Monetary Policy Committee (MPC) raised the policy rate by a cumulative 50 basis points, bringing it to 7.25% between April and October 2026. Economists note that monetary policy must remain vigilant, guarding against the risk that persistent shocks to fuel, administered prices, and food become entrenched in long-term inflation expectations and wage demands, which could threaten central bank credibility.
Growth Outlook Amid Structural Reform
On the domestic economic front, growth forecasts have been trimmed. Gross domestic product (GDP) growth is now projected to average 1.2% for 2026, down from 1.4% in April. However, economic activity is expected to pick up gradually, rising toward 2% by 2029 as ongoing structural reforms begin to yield fruit.
