Inflation expectations have fallen to a 25-year low after the inflation target was set at 3% recently, dropping by 0.5% for the next few years. According to the Bureau for Economic Research (BER) a survey indicated that the average inflation expectations of the three professional groups in the survey subsided significantly during the fourth quarter of 2025, dropping by around half a percentage point for 2026 and 2027, as well as the next five years. The respondents now expect headline inflation to be 3.8% next year and 3.7% thereafter, which is a record low.
BER says this significant downward revision happened against the backdrop of the minister of finance announcing a new inflation target of 3%, down from a midpoint target of 4.5% previously, during the medium-term budget policy statement last month. Actual reported headline inflation moved sideways around 3.5% from the period of the third to the fourth quarter survey. BER measures the inflation expectations of four social groups in a quarterly survey after the South African Reserve Bank (Sarb) commissioned it in 2001 to conduct a quarterly survey to measure inflation expectations and other macroeconomic variables related to inflation.
The four social groups are analysts, business people, senior representatives of trade unions and households. Four social groups are used because each group has a different perspective and effect on inflation. Business people, for example, affect prices in the real economy, while analysts affect financial markets and trade union representatives and households, in their role as employees, affect wage increases, which in turn have a big impact on inflation. The monetary policy committee (MPC) of the Sarb considers the results of the inflation expectations survey with other sources of information when it decides to change the repo rate.
Read Full Article on The Citizen
