3.6% Inflation Explained: Why South Africa’s Price Rise Isn’t Bad
When South Africa’s inflation rate nudges higher, the instinctive reaction is concern. Rising prices are felt immediately in households, especially where budgets are already stretched.
But as Francis Herd explains in this episode of Number of the Day, context matters.
South Africa’s latest inflation reading sits at 3.6%, slightly higher than previous months but still comfortably within the range economists consider healthy. Inflation measures how quickly prices rise over time; not whether prices are high or low in absolute terms.
In fact, inflation that is too low can be just as problematic as inflation that is too high. Economies function best when prices rise gradually, allowing wages, spending, and investment to adjust in a predictable way. That’s why inflation around 3% is often seen as a sweet spot.
The episode also highlights why headline inflation doesn’t tell the whole story. Food inflation, in particular, has a disproportionate impact on poorer households, which spend a larger share of their income on groceries. Even modest increases can therefore feel severe for many South Africans.
Finally, the discussion turns to interest rates. Stable and relatively low inflation gives the South African Reserve Bank greater flexibility. While no decisions are guaranteed, inflation at current levels keeps the door open for potential rate cuts later in the year.
The number of the day is 3.6%; a reminder that not every increase signals trouble, and that understanding the numbers matters as much as feeling their effects.