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 will 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 South African 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 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 with 3.9% and 4.3% previously.
The Reserve Bank's next interest rate announcement is scheduled for September 18.
Most 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.
Reuters
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