SA’s inflation expectations fell to their lowest in four years, the Bureau for Economic Research’s (BER’s) latest survey showed, with respondents anticipating consumer price growth below 4% for 2025.
According to the BER’s second quarter survey released on Wednesday, respondents on average revised their forecast for headline inflation in 2025 down to 3.9%, from 4.4% previously.
Expectations for 2026 and 2027 were similarly adjusted lower to 4.3% and 4.5%, respectively, pointing to a gradual upward drift closer to the midpoint of the Reserve Bank’s 3%-6% target range. Over the next five years respondents expect inflation to stabilise at 4.4%, very close to the Reserve Bank’s current target midpoint of 4.5%.
The BER’s survey captures the views of business people, trade union officials and financial analysts. Among the groups, analysts have the most benign view, predicting consumer inflation of 3.4% this year. Business executives expect 4.3%, while trade union representatives see it at 4%.
Earlier this week, Reserve Bank governor Lesetja Kganyago reiterated those views in the Bank’s annual report: “[Inflation] is likely to be below 4% this year... While risks to the outlook remain, there can be little doubt that inflation has been brought back under control for now.”
If this trend endures, it could ease pressure on the Reserve Bank, setting the scene for the monetary policy committee to consider another rate cut at its July meeting. The repo rate is currently at 7.25%.
However, Kganyago once again advocated for a lower inflation target. The Reserve Bank is currently in discussions with the Treasury to bring the target more in line with international peers.
“The main concern with SA inflation is not our ability to hit the target. Rather, it is that our target is high compared to other countries,” he said.
“For this reason, despite our success in stabilising inflation, the price level is almost 20% higher than it was in 2021.”
He said that an inflation rate of 4.5%, although moderate, still caused prices to double every 16 years.
“This is hard to reconcile with our constitutional obligation to safeguard the value of the currency,” Kganyago said.
The BER survey also highlighted contrasting trends in wage growth expectations. Respondents revised their forecasts for salary increases higher, now anticipating wage growth of 4.9% this year and 5.1% in 2026, compared to 4.5% and 4.8% previously, as concerns about compensation keeping pace with living costs persisted.
From a growth perspective, sentiment has turned more cautious. Average GDP growth forecasts were trimmed to just 0.9% for 2025, down from 1.2% previously, reflecting continued concerns about infrastructure constraints, policy uncertainty and muted private sector investment. Expectations for 2026 growth also edged lower, to 1.2%.
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