BER inflation expectations

  • The BER's 3Q23 inflation expectation survey showed that inflation expectations moderated from 6.5% to 6.1% for 2023, 5.9% to 5.5% in 2024, and 5.6% to 5.3% in 2025. The improvement can mainly be ascribed to business people and trade union officials lowering their forecasts, whereas analysts' forecasts remained unchanged. Household inflation expectations, which the Governor closely monitors, remain elevated but, although showing a marginal improvement. Expectations in 12 months have eased from 8.1% to 7.0%, and for the next 5 years from 10.7% to 9.8%.
  • This shows how adaptive inflation expectations are and the SARB's focus on headline inflation. Core CPI inflation shows the pass-through effect, but headline CPI inflation drives wage settlements and expectations.
  • The MPC, which is meeting on 21/9, is likely to take note of the improvement in inflation expectations. However, with input cost price pressures remaining elevated and headline CPI inflation rising above 5.0% from August, an expected pause is likely to remain a hawkish pause, even as the rate hiking cycle is expected to have peaked.

Fig 1  BER inflation expectations: Current, +1yr and +2yrs