Sustained fuel shocks raise South Africa's inflation persistence risk
South African Reserve Bank (SARB) research finds narrower inflation spillovers from the 2026 fuel shock than in 2022, despite larger energy price increases. Sustained fuel costs nevertheless raise firms' inflation expectations and delayed wage pressures.
Larger shock, narrower spread
Brent rose from a January average of $67 a barrel to $138 in early April 2026 following the Middle East conflict.
Petrol increased by R3.06 a litre in April and R3.27 in May despite temporary levy relief.
Across 389 consumer price items excluding petrol and diesel, weighted prices rose 2.4 percent over six months, versus 4.3 percent in 2022.
Food supplies and a resilient rand contained spillovers, but services prices rose 2.9 percent, versus 2.7 percent in 2022.
A separate model estimates that a sustained 30 percent fuel increase raises firms' two-year-ahead inflation expectations by up to 0.65 percentage points, versus 0.15 for a once-off shock.
The sustained shock adds up to 0.5 percentage points to inflation through expectations.
Markets anchor, wages lag
A modelled 40 percent oil shock raises five-year break-even inflation by about 48 basis points after two months; the 10-year response is weaker and temporary.
Wage growth rises about 1.5 percentage points after two quarters, while wage expectations adjust immediately.
Union expectations persist longer than those of firms and analysts.
Historical analysis finds second-round pressures more contained since around 2017.
Earlier oil shocks transmitted unevenly through food, transport and core goods, with persistence depending on the wider inflation environment.
Containment is not immunity
The authors caution that narrower spillovers do not eliminate persistence risks.
Six months of price data cannot establish the shock's full second-round effects, and broader price increases alone do not identify them.
These research findings represent the authors' views, not SARB policy.