South African Inflation Expectations Fall Further in Q3, Survey Shows

Key Findings

* Inflation expectations among South African consumers and businesses have declined further in the third quarter of 2023, according to a recent survey. * The median inflation expectation for the next 12 months has fallen to 5.4%, down from 5.7% in the previous quarter. * This marks the lowest level of inflation expectations since the fourth quarter of 2021.

Drivers of Declining Expectations

* The decline in inflation expectations is attributed to several factors, including: * The recent easing of global inflationary pressures, particularly in food and energy prices. * The South African Reserve Bank's (SARB) aggressive monetary policy tightening, which has raised interest rates by 200 basis points since November 2021. * Government's fiscal consolidation measures, which have helped to reduce fiscal pressures and stabilize the exchange rate.

Implications for Economic Policy

* The decline in inflation expectations is a positive development for South Africa. It suggests that the country is making progress in bringing inflation under control. * However, the SARB is likely to remain cautious in its monetary policy stance, as inflation remains above the target range of 3-6%. * The government will need to continue to implement prudent fiscal policies to support the SARB's efforts to stabilize inflation.

Conclusion

* The decline in inflation expectations in South Africa is a welcome development. It suggests that the country is on the right track in its fight against inflation. * However, it is important to remain vigilant and continue to implement sound economic policies to ensure that inflation remains under control.