Read 2 minutes

South African analysts, business people, and trade unions further lowered their inflation expectations in the third quarter of this year, bringing them closer to the level targeted by the central bank, a quarterly survey showed on Thursday.

The results of the survey – a key data point for the central bank at its monetary policy meetings – are likely to reinforce expectations that the bank will cut its key rate for the first time in more than four years on September 19.

The average inflation forecast for 2024 fell to 5.1 percent in the third quarter from 5.3 percent in the second quarter, the Bureau for Economic Research’s survey showed.

For 2025 the average dropped to 4.8 percent from 5.0 percent in the second quarter, and for 2026 it fell to 4.8 percent from 4.9 percent.

The South African Reserve Bank (SARB) tries to keep inflation close to 4.5 percent, the midpoint of its target band of 3-6 percent. In explaining previous decisions to keep rates unchanged, it said inflation expectations were still uncomfortably high.

Forecasts for a September rate cut were buttressed by July’s year-on-year inflation falling to 4.6 percent. August’s inflation print is scheduled for release on September 18, the day before the SARB’s rate announcement.

At the last monetary policy meeting in July two of the six members of the SARB’s Monetary Policy Committee voted for a 25 basis point cut, while four preferred no change, the eventual decision.
One worry for the central bank in the latest inflation expectations survey is that the inflation forecast of households rose steeply, reaching its highest level this year at 6.9 percent from 6.4 percent in the second quarter.

The rise was driven by the respondents in the low-income category, suggesting the poorest South Africans may be more exposed to price pressures.