The Bureau for Economic Research’s (BER’s) fourth-quarter Inflation Expectations Survey revealed that average inflation could increase by 0.1 percentage points to 6.2% in 2016, based on the expectations of analysts, business people and trade union officials.

The average inflation expectation for 2017 was also 6.2% in the fourth quarter.

Analysts and business persons had revised their forecasts slightly upwards to 5.6% and 6.6% respectively.

In contrast, trade unions raised their forecast by a noticeable 0.4 percentage points to 6.3%.

Although household inflation expectations rose from 6.7% to 6.9% in the fourth quarter, it remained below the 7.1% recorded in the second quarter.

Respondents retained their expectation of 1.5% economic growth during the year, and slightly lowered their forecast for 2016 from 1.7% to 1.6%.

On average, the survey respondents still expected salaries and wages to increase by 7.1% during 2015 and 2016.

“The deterioration in inflation expectations for both 2016 and 2017 is unlikely to sit well with the South African Reserve Bank, which maintains that it remains committed to anchoring inflation expectations which it deems “uncomfortably high”.

“The sharply weaker moves in the rand over the last 24 hours in the wake of the Finance Ministry ‘shake-up’ is likely to make matters worse and, in our view, increases the chances that the Reserve Bank opts to raise policy rates by a further 25 basis points come its January 28 Monetary Policy Committee meeting, versus our current baseline view that the bank would wait until March before raising rates again,” BNP Paribas Cadiz Securities economist Jeffrey Schultz said.

However, he highlighted that “a lot” could happen between now and the end of January. “We will await further data and events before making any changes to this view.

“Ultimately though, the weakness in the currency is likely to add further upside risk to an already problematic inflation outlook with the bank undoubtedly acutely aware that maintaining its credibility in the current uncertain market environment has never been so important,” he said.