Reserve Bank puts South Africa’s resilience to the test — and likes what it sees

Pretoria – South Africa’s new 3% inflation target could withstand most normal economic shocks, although a combination of severe shocks could still push inflation sharply higher, a South African Reserve Bank (SARB) analysis has found.

The SARB’s September 2026 Economic Note, titled Stress testing the 3% inflation target, found a 78% probability that inflation would remain between 2% and 4%, based on historical volatility.

The analysis also found that inflation would generally deviate by less than one percentage point from the 3% target following a standard-sized shock to major inflation drivers such as the rand, oil, food, electricity and labour costs.

The researchers said the results reflected stronger monetary-policy credibility and more firmly anchored inflation expectations, concluding that this “bodes well for the achievement of a 3% inflation target”.

However, the report warned that larger or prolonged shocks could pose a greater threat. A rand depreciation of about 14% or an oil-price increase of roughly 46% could push inflation more than one percentage point above target for a full year.

The researchers ran 100,000 simulations combining different economic shocks. They found a 62% weighted probability that headline inflation would remain between 2% and 4%, although extreme combinations could push inflation above 7% or below zero.

The note said: “as long as the magnitude of these shocks remains within 1 standard deviation, the 3% inflation target remains sturdy.”

The analysis comes as the SARB moves away from its previous preference for the 4.5% midpoint of the 3%-6% target range towards a lower 3% inflation anchor.