South African inflation rose by less than expected in May, which analysts said reduced the likelihood of another interest rate hike next month.

Headline consumer inflation quickened to 4.5% year on year from 4% in April. That was the highest reading since July 2024. However, economists polled by Reuters had expected 4.7%.

The rise was mainly driven by fuel price increases linked to the Iran war.

Annual core inflation, which strips out volatile items like food and energy, was 3.8% in May, in line with forecasts.

Standard Bank economist Elna Moolman said the downside surprise largely emanated from food prices, which were flat in month-on-month terms in May.

“This data, alongside the decline in oil prices in response to the imminent signing of an interim peace deal between the US and Iran, means that the upside risk to the inflation trajectory has subsided,” Moolman added.

Target

The South African Reserve Bank targets inflation of 3%, with a one percentage point tolerance band either side. At its last monetary policy meeting in May it raised rates for the first time in three years and is next scheduled to review its policy stance on 23 July.

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Independent economist Elize Kruger said the data showed no clear indication of second-round inflation impacts and with the US-Iran peace deal “there is a growing probability that the Reserve Bank could steer away from another interest rate hike in July”. — Anathi Madubela, (c) 2026 Reuters