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South African inflation expectations declined for the next two years, providing the central bank with welcome news ahead of its policy meeting next week, though it may not be enough to tempt it to cut interest rates.
Average inflation expectations for this year dropped to 5.4% in the first quarter of 2024, from 5.7% previously, according to a survey released on Tuesday by the Stellenbosch-based Bureau for Economic Research. The rate of price growth for 2025 is now seen declining to 5.3% from 5.6% and to 5.2% in 2026, according to participants in the poll of analysts, business people, labour unions and households.
The survey results will inform the policy debate at the South African Reserve Bank when it meets next week, though analysts generally expect it to keep interest rates on hold at 8.25% when it announces the decision on 27 March.
The bank aims to anchor inflation expectations at the 4.5% midpoint of its 3% to 6% target range. The headline inflation rate and expectations have been above that level since 2021.
Governor Lesetja Kganyago has repeatedly said that only when inflation is on a downward trajectory toward the midpoint will the MPC loosen monetary policy.
"The task of taming inflation is not yet done," Kganyago said in an interview with Bloomberg at the end of last month. "Until that is done, I don’t see why there should be a change in the monetary stance."
