The average inflation expectations of analysts, business and trade unions declined again during the third quarter survey, bolstering prospects that the SA Reserve Bank (SARB) will consider easing monetary ahead of its next repo rate decision that will be announced next week.
These social groups now expect headline inflation to average 5.1% in 2024 before subsiding to 4.8% in 2025 and 2026. In the second quarter survey, they still expected consumer inflation to register 5.3% in 2024 and fall to 4.9% in 2026.
The results of the quarterly inflation expectations survey produced by the Bureau of Economic Research (BER) on commission for the SARB are one of many factors that the monetary policy committee (MPC) of the SARB considers when it decides on the interest rate.
The third quarter survey, published on Thursday, showed that analysts expected the lowest inflation rate over the forecast horizon.
“Overall, the three social groups expect inflation to average 4.8% over the next five years. This is slightly lower than the 4.9% they expected before. However, in this case, only analysts expect a rate close to the target of 4.5%, trade union officials foresee a rate around 5%, similar to business people,” the BER said.
The groups surveyed still expected GDP growth of just below 1% in 2024, but they revised their forecast for 2025 up by 0.2 percentage points to 1.5%.
Trade unions made a huge upward revision to their forecast of wage increases. They expect wages to rise by 5.6% in 2024 and 5.9% in 2025. Consequently, the average forecast for 2025 increased slightly from 4.9% to 5.0%, while that for 2026 increased from 4.9% to 5.3%.
In its most recent interest rate decision in July, the MPC said SA’s inflation outlook had improved. At the time the Bank forecast inflation to return to the midpoint of its 3%-6% target band in the fourth quarter of 2024. It previously forecast price increases would dip below 4.5% by only the second quarter of 2025.
In July, SA’s consumer inflation dipped below 5% for the first time in a year, easing to 4.6% from 5.1% in June.
According to the Bank, headline consumer inflation for 2024 is projected at 4.9%, compared with the 5.1% forecast at the previous meeting and down from 6% in 2023.
Stats SA will release inflation data for August on Wednesday next week, one day before the MPC repo rate decision for September will be announced.
Markets are broadly pricing in a 25 basis points cut for September and a similar cut in November. The repo rate was last adjusted in May 2023 when the MPC raised it by 50 basis points to 8.25%.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.