South Africa inflation expectations dip before rate decision
South African inflation expectations for the next two years declined, signalling progress in the central bank’s efforts to rein them in before its policy meeting later this month.
Average inflation expectations two years ahead — which the bank’s monetary policy committee (MPC) uses to inform its decision-making — fell to 4.9% in the second quarter from 5.2% previously, according to a survey released on Friday by the Stellenbosch-based Bureau for Economic Research (BER).
All social groups including analysts, businesspeople, and labour officials lowered their inflation forecasts for the entire three-year horizon BER surveys, it said.
“On average, they now anticipate inflation of 5.3% in 2024, 5% in 2025, and 4.9% in 2026,” it said. “Their five-year inflation forecast fell below 5% to 4.9% for the first time since the fourth quarter of 2021.”
The drop will help ease concerns expressed by the MPC at its last meeting that inflation expectations remain above the 4.5% midpoint of the bank’s target range, where it prefers to anchor them. The reading, coupled with easing inflation pressures, may pave the way for interest rates to be lowered later this year.
For now, however, analysts expect the MPC will leave the key interest rate at 8.25% for a seventh straight meeting on July 18.
Forward-rate agreements are pricing in just a 20% chance of a 25-basis-point rate cut this month, and an 80% probability of a similar reduction by the next MPC meeting September. The contracts are pricing in 37 basis points of cuts by year-end.
Governor Lesetja Kganyago has been cautious to proclaim an end to the MPC’s inflation fight. He’s repeatedly said the MPC won’t cut rates until inflation is firmly at 4.5%.
The survey respondents still expect the prime overdraft rate - which banks use to lend to consumers - to fall by 50 basis points this year to 11.25%.
Comments
Press Office
Announcements
What's On
Subscribe to improve your user experience...
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation