Johannesburg – The latest quarterly survey commissioned by the South African Reserve Bank indicates that inflation expectations have stabilised, with analysts, business leaders and trade‑union officials forecasting headline consumer inflation of 4.4% for the remainder of 2024. This marks no change from the second‑quarter poll, suggesting the market has absorbed the shock from higher oil prices caused by the Iran conflict.
Key numbers from the survey
The survey, which guides the Reserve Bank’s thinking on interest‑rate policy, also shows a slight easing in longer‑term outlooks. Forecasts for 2027 fell to 4.0% from 4.2% in the previous quarter, and expectations for 2028 dropped to 3.8% from 3.9%.
Current inflation measured year‑on‑year was 4.3% in July, the most recent data available. The central bank’s target remains 3% with a permissible band of plus or minus one percentage point.
Implications for monetary policy
Because interest‑rate changes affect the economy with a lag of roughly 12 to 24 months, the Reserve Bank closely watches these expectations when setting policy. After a surprise decision to keep its main lending rate unchanged in July – following a first hike in three years in May – the bank is slated to announce its next move on September 23.
Stabilised expectations give the central bank a degree of confidence that its current stance is appropriate. The modest decline in longer‑term forecasts may also signal that businesses and households anticipate a gradual easing of price pressures, which could support a more measured approach to future rate adjustments.
Context and background
The previous quarter saw a sharp rise in inflation expectations after oil prices spiked amid the Iran war, prompting concerns about a possible inflationary spiral. The latest data suggest that those concerns have abated, at least for the short term.
Economists note that while the 4.4% near‑term outlook remains above the Reserve Bank’s target band, it is still lower than the peak expectations recorded earlier in the year. The central bank’s willingness to pause rate hikes reflects a balanced view of growth prospects and price stability.
What’s next?
All eyes will be on the September 23 meeting, where the Reserve Bank will decide whether to maintain the current rate, raise it further, or consider a cut if inflation continues to trend lower. Market participants will likely weigh the latest expectations alongside other indicators such as employment data, commodity prices and global economic developments.
For South Africans, the stability in inflation expectations offers a measure of reassurance that the economy is not heading toward runaway price growth, and that the central bank is acting prudently to protect purchasing power while supporting growth.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
