Yet for most households, optimism about inflation feels disconnected from everyday reality. A trip to the supermarket, the monthly electricity bill or the cost of filling a fuel tank suggests that life remains stubbornly expensive. If inflation is falling, why does it still feel like prices are rising everywhere?
Part of the answer lies in understanding what inflation actually measures. Inflation slowing does not mean prices are falling, it simply means they are increasing at a slower pace. After several years of sharp price increases, households are now living with a permanently higher cost base. Even if inflation declines, those earlier price hikes do not automatically reverse.
But global forces are also playing a powerful role in shaping the cost pressures South Africans continue to experience. Since 2020, inflation worldwide has shifted from sudden disruptions to more persistent and uneven pressures. Energy prices are no longer rising as dramatically as they did during global supply shocks, but they remain elevated compared to pre-pandemic levels. Shipping costs have stabilised, yet logistics networks remain more complex and expensive than before.
At the same time, inflation has moved into services such as housing, healthcare and transport sectors that respond slowly to improvements in global conditions. These structural shifts have effectively raised the global cost baseline. Businesses have adjusted pricing strategies, rebuilt margins and become cautious about reversing price increases even when inflation slows.
For a small open economy like South Africa, these global dynamics matter deeply. A large share of what households consume, from fuel and food inputs to manufactured goods, is either imported directly or priced against international markets. Exchange rate fluctuations and global price trends therefore filter quickly into domestic costs. When the rand weakens or oil prices rise, households feel the impact almost immediately.
Labour market dynamics add another layer to this reality. In many advanced economies, tight labour markets have supported wage growth, which in turn has sustained services inflation. In South Africa, however, wage growth has generally lagged behind rising prices. The result is that households experience inflation less through higher nominal incomes and more through declining purchasing power.
The way inflation unfolds domestically also helps explain why relief feels slow. Prices tend to rise quickly when global shocks occur, whether through fuel costs, exchange rate movements or imported food inflation, but they are far slower to adjust when conditions improve. This asymmetry is common in open economies: bad news pushes prices up rapidly, while good news takes time to translate into lower cost pressures. For households, that means the pain of inflation is immediate, but the benefits of stabilisation arrive gradually.
Against this backdrop, the SARB’s revised inflation target has raised questions about whether monetary policy can provide immediate relief. The short answer is that the new framework is not designed to make prices suddenly cheaper. Instead, its goal is to anchor expectations and prevent inflation from becoming entrenched. By shaping how businesses, workers and consumers anticipate future price changes, the SARB aims to limit the risk that temporary shocks become permanently embedded in wages and pricing behaviour.
This distinction is important. Monetary policy can slow the pace of future price increases, but it cannot undo past increases in food, housing or transport costs. Lower inflation therefore brings predictability rather than instant affordability. Over time, stable inflation helps protect purchasing power, supports investment and encourages sustainable wage growth, but the benefits emerge gradually, not overnight.
For households, frustration is entirely understandable. Prices rose rapidly during a period of global disruption, but relief has been uneven and slow to materialise. Any benefits from lower interest rates are likely to be felt first by indebted households through reduced borrowing costs, while families facing high food, transport and education expenses may continue to experience financial strain for longer.
Seeing inflation as an ongoing process rather than a single event helps explain why 2026 may still feel expensive even as economic indicators improve. South Africa’s deep integration into the global economy means domestic prices respond quickly to external shocks, while labour incomes adjust more slowly. Until productivity growth strengthens and labour market outcomes improve, lower inflation alone will not be enough to significantly ease cost-of-living pressures.
For policymakers, this reality underscores the importance of structural reforms that support growth, job creation and productivity gains. For households, it suggests that while the inflation outlook may be improving, the experience of financial pressure is likely to linger for some time.
The year ahead may therefore be characterised by a paradox: improving economic indicators alongside continued strain on household budgets. Inflation may be slowing, but the effects of past price increases remain deeply embedded in everyday life. Over time, a more stable inflation environment should bring greater predictability and gradual relief. Until then, many South Africans will continue to navigate a cost-of-living landscape that still feels uncomfortably expensive.
