South African investors are preparing for the release of December’s consumer inflation figures on Wednesday, a data point that will help shape expectations for interest rates in the months ahead.

Inflation eased to 3.5% in November from 3.6% in October but is expected to edge slightly higher again, back to 3.6% in December. Even with that marginal increase, price growth remains comfortably within the target range of the South African Reserve Bank (SARB), reinforcing the case for an extended period of lower domestic interest rates.

Inflation has been anchored by two powerful forces that are likely to persist through the first half of 2026. Softer global oil prices have reduced fuel and transport costs, while a firmer rand has helped dampen imported inflation. Together, these trends have eased pressure on household budgets and business input costs.

According to The Common Sense economics and policy editor Bheki Mahlobo, inflation remaining within the SARB’s target band creates space for interest rate cuts across the year. However, he cautioned that the SARB may hold rates constant at its first meeting, set for 29 January, and wait for signals from the United States Federal Reserve before deciding on the timing of local rate cuts for 2026.