South African inflation expectations declined for the first time in two years, suggesting price pressures have peaked and the central bank will be able to keep interest rates on hold. <\/p>\n\n\n\n
Average inflation expectations for this year fell to 6.1% in the third quarter from 6.5% previously, according to a survey released on Monday by the Stellenbosch-based Bureau for Economic Research (BER). <\/p>\n\n\n\n
The rate of price growth for 2024 is now seen declining to 5.5% from 5.9% and to 5.3% from 5.6% in 2025, according to participants in the poll of analysts, business people, labour unions and households.<\/p>\n\n\n\n
\u201cIt was the first drop in average 2023 expectations in two years,\u201d BER said. \u201cLower expectations were also evident over the entire forecast horizon \u2014 2023 to 2025 \u2014 and mostly due to downward revisions by business people and trade unionists,\u201d it said in a statement published on its website. <\/p>\n\n\n\n
The expectations were slightly above the central bank\u2019s average inflation forecasts of 6% for this year, 5% for next and 4.5% for 2025.<\/p>\n\n\n\n
The survey results influence decision-making by the South African Reserve Bank\u2019s monetary policy committee, which prefers to anchor inflation expectations close to the 4.5% midpoint of its target range. Its preferred indicator for medium-term inflation expectations is two years ahead.<\/p>\n\n\n\n
The rate of price growth has dropped for four straight months to 4.7% and is nearing the midpoint, which it has exceeded since May 2021.<\/p>\n\n\n\n
The central bank\u2019s MPC has raised the key interest rate by a combined 475 basis points to 8.25% at 10 straight meetings to contain inflation before pausing in July.<\/p>\n\n\n\n
Governor Lesetja Kganyago has repeatedly said that the job of combating inflation is not yet done. \u201cThe arrival of one swallow does not mean that summer is here, we need to see a couple more,\u201d he said last month. Concerns he has highlighted include core goods inflation, price setters\u2019 inflation expectations and currency weakness.<\/p>\n\n\n\n
Forward-rate agreements starting in a month \u2014 used to speculate on borrowing costs \u2014 are pricing no chance of a rate increase at the central bank\u2019s upcoming MPC meeting on 21 September 2023. The yield on rate-sensitive 2026 government bonds dipped two basis points to 8.99%<\/p>\n\n\n\n
Average five-year inflation expectations fell to 5.1% from 5.2%, the BER said. The survey was conducted between 14 and 31 August 2023.<\/p>\n\n\n\n