Good news on inflation in February, but don’t celebrate yet

2026-03-18 - 13:01

Annual consumer price inflation cooled to 3.0% in February from 3.5% in January 2026, thanks to lower food prices and a delay in implementing medical aid increases. Statistics South Africa (Stats SA) data released on Wednesday showed that consumer price inflation (CPI) rose 0.4% month-on-month in February 2026. The agency said February’s print was below average, attributed to three main factors. While analysts noted this is good news, many forecast that things could get worse in the coming months, depending on how long the Middle East conflict lasts. ALSO READ: Inside the most expensive city to buy groceries in SA Good news, but the worst is coming Professor Waldo Krugell, an economist at the Faculty of Economic and Management Sciences at North-West University (NWU), told The Citizen that inflation cooling is good news; however, this will be easily disrupted by oil prices. “The inflation rate declined in February, goods inflation was down, services inflation was down, core inflation was 3%, and we know that inflation expectations were also down in quarter one,” he said. “All this would be a win for the South African Revenue Services (Sarb) and the lower target, but unfortunately, soon to be disrupted by the war oil shock.” Brace for impact Tertia Jacobs, Treasury Economist and Fixed Income Specialist at Investec, said inflation in March and going forward might start rising. “Medical aid inflation remained subdued, mainly due to Discovery’s tariff increases only coming into effect in April and therefore not yet reflected in the data,” said Jacobs. “This reading is likely to represent a trough in inflation. From here, we expect inflation to start rising, reaching around 3.3% in March. A more pronounced increase is anticipated in April, driven by a significant petrol price shock.” “The extent of this impact will depend on whether government intervenes to reduce the fuel levy, versus a full pass-through of the under-recovery.” Factors attributed to cooling inflation Stats SA said the first reason why inflation cooled is the delay in implementing some new medical aid rates. “Most medical schemes increase prices at the beginning of the year and are surveyed by Stats SA in February, resulting in a higher-than-average monthly rate,” said the agency. “In February 2026, however, not all medical schemes had adjusted their contributions, resulting in a lower monthly change than would otherwise have been the case. Those schemes that implemented increases contributed to an average rise of 6.4% in health insurance, lower than the 10.5% increase recorded in February 2025.” ALSO READ: 2026 medical aid contribution increases: DHMS vs the rest Decline in fuel prices Stats SA said the drop in petrol prices in February also contributed to a decline in CPI. “Fuel prices decreased by 3.1% month-on-month compared with a rise of 3.9% recorded in February 2025, contributing to an annual decline of 10.1% in the fuel index.” The agency also noted that prices for medical services increased more slowly than in the same month last year. Most health services are surveyed in February each year. “The monthly change in the index was 3.8%, lower than the 5.0% recorded in February 2025,” said Stats SA. “Examples of monthly increases recorded in February 2026 include dentists (5.3%), paediatricians (4.4%), general practitioners (3.5%), physiotherapists (2.2%) and optometrists (1.6%).” Inflation meets Sarb target Dr Elna Moolman, Standard Bank Group Head of South Africa Macroeconomic Research, said inflation is still benign in February, exactly matching the Reserve Bank’s new inflation target of 3%. “This was slightly lower than expected, mainly because food prices fell more than we had factored in,” she added. According to Stats SA, softer food and non-alcoholic beverages (NAB) inflation also contributed to the lower CPI print in February. The annual rate for food and NAB declined to 3.7% from 4.4% in January. Those who enjoy a weekend braai can breathe a little easier. Meat inflation eased to 12.2% from 13.5% in January. “The monthly rate was -1.1%, the first decline in almost a year. Beef products recorded large monthly price decreases, including beef offal (-4.0%), stewing beef (-3.7%), beef mince (-3.2%) and beef steak (-2.6%). Other notable meat products that were cheaper include pork (-1.6%) and lamb & mutton (-1.4%).” Spike in oil prices Moolman said the data largely predate the war on Iran, though, as well as this resulting spike in oil prices and the weakening of the Rand exchange rate, both of which will be more inflationary than expected before the war. “If the war is relatively short-lived, the resulting spike in fuel prices should cause a fleeting spike in inflation, but the longer oil prices stay high and or the Rand stays weaker, the higher the risk that this will also result in more indirect inflation pressure that broadens beyond just fuel prices,” she added. “At this stage, we expect the Reserve Bank to sound hawkish about the inflationary risks brought about by the war, but for now, we expect this to merely delay the interest rate cuts that we previously expected. “But the situation remains very fluid, and the inflation and interest rate impact will ultimately depend on whether the war escalates and how long it continues.” NOW READ: SA could be a big loser in Middle East conflict: Oil surges, stronger dollar hits rand