South African Inflation Expectations Stabilize Ahead of Rate Decision

Inflation expectations in South Africa stabilized during the third quarter, according to a survey commissioned by the South African Reserve Bank. The average forecast for headline consumer inflation this year held steady at 4.4%, recovering from a steep rise in the previous quarter triggered by an oil price shock linked to the Iran war.

Long-term outlooks improved as forecasts for 2027 and 2028 declined to 4.0% and 3.8%, respectively. These projections are critical for the central bank's monetary policy, as interest rate adjustments typically take 12 to 24 months to influence the broader economy. Actual inflation was recorded at 4.3% year on year in July.

The central bank targets an inflation rate of 3% with a 1-percentage-point tolerance band. Following a rate hike in May, the bank maintained its main lending rate in July. The South African Reserve Bank is scheduled to make its next interest rate announcement on September 23.