South Africa's longer-term inflation expectations drop to record low
South Africa's longer-term inflation expectations fell to their lowest level on record, a quarterly survey showed on Monday, after the central bank said it would aim for a lower inflation level.
Analysts, business people and trade unions now expect annual inflation to average 4.2% over the next five years, down from 4.4% in the second quarter survey. Inflation stood at 3.5% in July, the latest month for which data is available.
"These downward revisions were made against the backdrop of the SA Reserve Bank's announcement of a change to the preferred inflation target at the end of July, just before the survey period," the Bureau for Economic Research, which conducts the survey, said in a report.
The central bank, which commissions the survey, has been pushing for a formal change to its current inflation target range of 3% to 6%.
At its last interest rate announcement it said it would start aiming for 3% inflation, rather than the middle of its target band, despite the finance minister not yet signing off on any official change to its target.
Short-term inflation expectations were also revised down in the third-quarter survey, with forecasts for 2025 and 2026 averaging 3.8% and 4.2%, respectively, compared to 3.9% and 4.3% previously.
The South African Reserve Bank's next interest rate announcement is scheduled for September 18.
The majority of economists polled by Reuters expect the country's main lending rate to remain unchanged, given a modest uptick in inflation in July and possible further rise in August.
Some analysts think the bank's stated preference for 3% inflation will also encourage it to maintain its repo rate after cuts in May and July.
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