This is a paid article which your subscription is allowing you to read.

The Common Sense expects inflation to have risen to near 4.8% year-on-year in May from 4.0% year-on-year in April, while core inflation, which excludes more volatile items such as food, fuel, and energy, is expected to edge up to about 3.8% year-on-year from 3.6% year-on-year. That would suggest that underlying price pressures remain relatively contained, with the main upward pressure still coming from fuel dynamics linked to developments around the Iran conflict.

The May reading will be closely watched for early evidence that higher fuel costs are feeding into broader prices. Additional pressure is also likely to come from administered prices, with Eskom’s April electricity tariff increase of near 10% beginning to filter into overall inflation.

The inflation number is likely to reinforce expectations of a relatively hawkish South African Reserve Bank (SARB), as the central bank seeks to anchor inflation towards its target of 3%. The market is currently pricing in roughly two further 25 basis point hikes over 2026. However, the recent fall in oil prices should moderate inflation in the coming months and could lead markets to reassess that outlook.

The view of The Common Sense, given the oil outlook, is that the SARB will hike rates by an additional 25 basis points and then hold the repo rate at 7.25%.

For the SARB, the key question is not only whether inflation rises, but whether the fuel shock is beginning to spread into broader prices. If the May inflation number shows clear broader pass-through inflationary effects on South Africa’s economy, the bank will have a stronger case to raise rates again in July.

But the forward-looking picture is already improving.

Brent crude is trading 30% below it's wartime high and was trading at $78.30 this morning. That supports The Common Sense forecast that Brent is more likely to move toward $65 to $73 per barrel by late 2026 than remain near $100.

Should Brent move into that range, inland 95 octane petrol could fall from around R26.63 per litre toward roughly R20 to R23 per litre, provided the rand does not weaken enough to offset the gain.

That matters because South Africa’s inflation outlook is heavily exposed to fuel. Lower oil means lower petrol prices, which would reduce pressure on headline inflation.

For that reason, the May inflation number may mark a point near the peak of the current inflation cycle, which means a shorter rate hike cycle by the SARB.