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SOUTH AFRICA: Inflation Expectations Fall In Q3 Supporting Case For SARB Cut

SOUTH AFRICA
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The latest survey from the Bureau for Economic Research (BER) showed that inflation expectations for the current year fell to +5.1% Y/Y in Q3 from +5.3% recorded in Q2. Inflation expectations for 2025 and 2026 fell to +4.8% Y/Y for both years from +5.0% and +4.9% respectively in the previous survey.

  • "The average inflation expectations of analysts, business people and trade unions declined again during the third quarter survey. They now expect headline inflation to be 5.1% this year, before subsiding to 4.8% in both 2025 and 2026. In the second quarter they still expected consumer inflation to register 5.3% this year and fall to 4.9% in 2026."
  • This comes as market-based indicators of inflation expectations monitored by the SARB fell sharply between April and August before stabilising near current levels. 5-year breakeven inflation rate last sits at 4.51%, oscillating around the SARB's target mid-point of +4.5% Y/Y (with several forays below that level seen recently), while 10-year breakeven rate operates at 5.58%.
  • The focus turns to August CPI data and FOMC monetary policy meeting, both slated for September 18, the eve of the next SARB meeting. A number of desks expect South Africa's central bank to deliver its first cut of the cycle this month, with 1x4 FRAs last seen 26.3bp shy of the 3-month JIBAR.
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The latest survey from the Bureau for Economic Research (BER) showed that inflation expectations for the current year fell to +5.1% Y/Y in Q3 from +5.3% recorded in Q2. Inflation expectations for 2025 and 2026 fell to +4.8% Y/Y for both years from +5.0% and +4.9% respectively in the previous survey.

  • "The average inflation expectations of analysts, business people and trade unions declined again during the third quarter survey. They now expect headline inflation to be 5.1% this year, before subsiding to 4.8% in both 2025 and 2026. In the second quarter they still expected consumer inflation to register 5.3% this year and fall to 4.9% in 2026."
  • This comes as market-based indicators of inflation expectations monitored by the SARB fell sharply between April and August before stabilising near current levels. 5-year breakeven inflation rate last sits at 4.51%, oscillating around the SARB's target mid-point of +4.5% Y/Y (with several forays below that level seen recently), while 10-year breakeven rate operates at 5.58%.
  • The focus turns to August CPI data and FOMC monetary policy meeting, both slated for September 18, the eve of the next SARB meeting. A number of desks expect South Africa's central bank to deliver its first cut of the cycle this month, with 1x4 FRAs last seen 26.3bp shy of the 3-month JIBAR.