Bad news for interest rates in South Africa

A key gauge of South African inflation expectations rose slightly, providing central bankers with another reason to be cautious about lowering borrowing costs when they meet this week.

Expectations for average inflation in two years’ time — a measure the central bank’s monetary policy committee uses to inform its decision-making — edged up to 4.7% in the first quarter from 4.6% previously, according to a survey released on Monday by the Stellenbosch-based Bureau for Economic Research.

Expectations for this year fell to 4.3% from 4.5%. The rise in expectations in two years’ time adds to concern about the impact that US President Donald Trump’s tariff war will have on global inflation.

The median estimate of economists surveyed by Bloomberg is for the central bank to leave benchmark interest rates on hold at 7.5% on Thursday.

South African Central Bank Governor Lesetja Kganyago warned last month that tariff increases risk the global economy and may reverse the recent cycle of central bank policy easing.

Kganyago said he assesses South African inflation to be creeping up, noting baseline assumptions that show prices rising to the 4.5% midpoint of the Reserve Bank’s 3%-to-6% target range, where it prefers to stabilise expectations.

Statistics South Africa will release its latest annual inflation data on Wednesday. According to a median estimate of 15 economists in a Bloomberg survey, the data is expected to show an uptick to 3.4% in February from 3.2% the previous month.

If the MPC did cut rates — as six of the 19 economists surveyed by Bloomberg predict — it would be the fourth such move since the Reserve Bank started its easing cycle in September.