September inflation brings good news – Will rate cuts start in 2027?
The chief economist expects interest rate cuts to start in 2027 if average inflation is 4.3% in 2026.
September's inflation rate ticked up slightly, with economists predicting an average inflation rate of 4.3% in 2026. This suggests the South African Reserve Bank (Sarb) may begin its interest rate cut cycle. Consumer price inflation (CPI) reached 4.5% in September 2026, a modest increase from 4.4% in August. The main positive surprise came from rental inflation, which slowed down slightly from 4.1% to 3.9%, and owner's equivalent rent eased from 4.0% to 3.8%.
Rental prices, which account for roughly 17% of the CPI basket, are surveyed quarterly. Food inflation remained low, though it did climb from 0.7% year-on-year in August to 1% in September. Consumer goods inflation stayed unchanged at 0.6% year-on-year. Els, a PSG Financial Services chief economist, emphasized that there is still little indication of second-round inflationary pressure.
He expects inflation to climb to slightly above 5% in October and November, but anticipates it will drop back below 3% by the second half of 2027, depending on oil prices and petrol prices. The Reserve Bank has already increased interest rates in May and September, but Els does not see a need for further hikes for the rest of the year.
He believes a better inflation number could lead to interest rate cuts again by this time next year.
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