Second-round inflation pressures have eased since 2017
South African Reserve Bank (SARB) research finds second-round inflation pressures have moderated since around 2017. The large, persistent fuel shock now risks embedding higher inflation in wages and expectations.
Fuel costs reach beyond pumps
Witness Simbanegavi and Mokgabiso Tshenkeng distinguish direct fuel-price increases from indirect effects through production costs; together these constitute first-round effects.
Second-round effects emerge through wages, inflation expectations and subsequent pricing behavior.
South African transport inflation rose from an average 0.3 percent over the 12 months ending March 2026 to 4.7 percent in April and 10.6 percent in June.
Second-round pressures have been muted, often negative, since around 2017, coinciding with the SARB's emphasis on the 4.5 percent target midpoint and later the 3 percent target.
Wage expectations remain relatively anchored, but two-years-ahead inflation expectations have edged higher following the current shock.
History cannot isolate every channel
A structural vector autoregression uses quarterly data from Q1 2001 to Q1 2026, ordering fuel prices, headline inflation, two-years-ahead inflation expectations, wage growth and the policy rate.
Fuel pressures around 2008, 2011 and 2022 coincided with stronger second-round pressures.
The model separately identifies fuel and wage-expectations shocks; the latter also reflect other inflationary forces.
It assumes constant transmission.
Quarterly expectations surveys and infrequent wage data limit real-time detection, while core inflation cannot directly isolate second-round effects.
Judgment carries the burden
The decomposition is evidence of association, not a clean estimate of fuel-induced second-round effects.
That limits its value as a mechanical policy trigger.
The authors favor looking through initial price effects while using expectations, wages and pass-through evidence to judge persistence.