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This is also a positive sign for the Reserve Bank in its quest to lower and narrow South Africa’s inflation target to 3%.
The latest Bureau for Economic Research Inflation Expectations Survey for the third quarter of 2025 showed that all three social groups surveyed lowered their longer-term inflation expectations.
These three groups – consisting of analysts, business people and trade union officials – now expect headline inflation in the next five years to average 4.2%.
This which is 0.2 percentage points lower than during the second quarter, and the lowest rate on record.
Similarly, the three groups lowered their expectations for headline inflation in 2027 by 0.3% percentage points to 4.2%, the lowest in 20 years.
Among the three social groups, analysts and trade union officials both made similar downward revisions, though analysts expect five-year inflation to average at 3.6%, while trade unionists expect 4.3%.
Business people were the exception – they made no changes to their previous forecast for 2027 or the five-year average and still expect an average of 4.5% for the latter.
This comes after the Reserve Bank announced that it will change its preferred inflation target – therefore, not the official target – to 3% from 4.5% immediately.
Therefore, while South Africa’s inflation target range will remain at 3% to 6% until an official change is announced, the Reserve Bank will try to anchor inflation expectations around 3%.
In terms of near-term expectations, the three social groups, on average, lowered their forecast of headline inflation by 0.1% percentage points for both 2025 and 2026, to 3.8% and 4.2%, respectively.
All three social groups did some slight downward revisions, with analysts now expecting 3.9% next year, business people 4.5% and trade unions 4.3%.
Similar to their view on lower consumer inflation, the respondents also downwardly revised their forecast of wage increases.
They now expect salaries to rise by 4.7% this year and 4.8% next year, compared to 4.9% and 5.1% previously.
Economic growth expectations continued to be eroded among all three social groups, though by a smaller margin than previously.
On average, the three groups expect GDP growth of 0.8% this year and 1.2% next year, a slight change from 0.9% and 1.2% previously.
The Reserve Bank’s Monetary Policy Committee is set to meet again later this month, where members will decide whether to cut South Africa’s interest rates further.
The breakdown of all the social groups’ inflation expectations can be seen in the table below.
Issued on Daily Investor BY Bianke Neethling | https://dailyinvestor.com/finance/101998/best-news-for-south-africas-interest-rates-in-over-a-decade/
