South Africans’ inflation expectations dropped further in the fourth quarter of 2025, marking a second consecutive decline and signalling growing confidence in the Reserve Bank’s new 3% inflation target. According to the Bureau for Economic Research (BER) survey released on Friday, the average inflation expectations of analysts, businesspeople and trade union officials fell by about half a percentage point for 2026, 2027 and the next five years. Respondents now expect headline inflation to average 3.8% in 2026 and 3.7% in 2027, the lowest levels since records began in 2011.
The revision follows finance minister Enoch Godongwana’s announcement of the new 3% target during the medium-term budget policy statement (MTBPS) in November. Actual inflation has remained stable at about 3.5% since the third quarter, helping to anchor expectations. The BER noted none of the groups yet expect inflation to stabilise in the long run around the new 3% target, “but the broad-based downward shift is nonetheless remarkable”.
All three professional groups adjusted their long-run forecasts lower. Analysts now expect inflation to settle at 3.4% two years ahead, business people at 4%, and trade union officials at 3.8% — showing that while none yet see inflation stabilising at 3%, sentiment is clearly converging toward it. Household expectations also continued to moderate, easing to 5.3% for the next 12 months from 5.5% in the third quarter — the lowest reading in four years, down from a peak of 8.1% in mid-2023.
Read Full Article on Business Day
[paywall]
In contrast, respondents left wage growth expectations largely unchanged, forecasting average salary increases of 4.7% in 2026, while their outlook for real GDP growth in 2026 edged slightly higher to 1.3%, from 1.2% in the previous survey. The broad-based decline in expectations is likely to reassure policymakers that the new target is gaining credibility, even as inflation remains close to 3.5%. The Reserve Bank’s monetary policy committee will take this into account at its next meeting early in 2026, with the data likely to strengthen the case for gradual rate cuts later in the year if disinflation persists.
Consumer inflation data for November will be released on Wednesday, with economists divided on the outcome. BER chief economist Lisette IJssel de Schepper expects annual consumer inflation to rise to 3.9% in November, from 3.6% in October. “After a flip from dragging on headline CPI for 13 consecutive months to adding positively in October, transport (fuel) price increases will likely again add to inflationary pressure.”
[/paywall]
