THE SA Reserve Bank (Sarb) is anticipated to maintain its current interest rate at 7.5% per annum today, as it takes a measured approach to assess the potential ramifications of an impending VAT increase.

This decision comes amid predictions of rising consumer inflation, which is expected to persist its upward trajectory in the forthcoming months.

With economic pressures mounting, many are looking towards the Sarb's next moves as a litmus test for the ongoing cost-of-living crisis affecting households across the nation.

FNB senior economist, Koketso Mano, said the coming months may witness several factors influencing inflation trends.

Key among these are the fading of base effects, an expected increase in consumer spending, and the looming impact of a VAT hike—all of which are anticipated to push inflation rates higher as the year advances.

Mano said, fortunately, inflation expectations remained anchored, with the latest BER survey result for the first quarter of 2025 showing inflation averaging 4.6% across various time horizons.

“This should allow monetary policy the space to continue to loosen its noose on the economy, shifting more towards a neutral stance by year-end – we see that neutral level at 7.0%,” Mano said.

“We do not think that the next cut will be at the March meeting, as global volatility unfolds, but another cut is probable before the end of the first half of 2025.”

Stats SA reported that the inflation rate for food and non-alcoholic beverages ticked up to 2.8% in February, up from 2.3% January.

Key food categories such as fruit and nuts, vegetables, hot beverages, seafood, meat, and cereals experienced significant rises in price, contributing to the overall inflationary trend.

However, cold beverages, milk, dairy products, eggs, oils and fats, as well as sugar, confectionery and desserts, all recorded slower inflation in February.

On a monthly basis, consumer inflation saw a notable increase of 0.9% in February, marking the highest rise in a year, a sharp jump from the 0.3% increase recorded in January.

Notably, consumer prices for meat remained static when compared to January, with a monthly change of 0% and an annual rate also holding at 0%. This stability in meat prices is somewhat counterbalanced by the ongoing escalation of inflation for hot beverages.

Meanwhile, core inflation—which excludes food, non-alcoholic beverages, fuel, and energy—fell to 3.4%, its lowest since December 2021.

Nedbank economist, Johannes (Matimba) Khosa, said the rise in inflation will emanate from various sources, but goods inflation, principally food and fuel, will take the lead.

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Reserve Bank expected to keep interest rates on hold amid VAT, inflation pressures