Bad news for Reserve Bank interest rates

In the second quarter of 2023, the average inflation expectations of analysts, business people and trade unions increased further. It could lead to another interest rate hike or keep interest rates higher for longer.

This was revealed in the Bureau for Economic Research (BER) Inflation Expectations Survey for the second quarter of 2023.

In 2001, the South African Reserve Bank (SARB) commissioned the BER to conduct a quarterly survey to measure inflation expectations and other macroeconomic variables related to inflation.

Four social groups are covered: analysts, business people, senior representatives of trade unions and households. 

The results of the inflation expectations survey are one of many factors that the Monetary Policy Committee (MPC) of the SARB considers when it decides on the interest rate. 

The MPC will be concerned if inflation expectations increase, are significantly above the midpoint of the inflation target range of 3% to 6%, or the other inflation indicators deteriorate.

In the Q2 2023 survey, expectations for average inflation in 2023 rose by 0.2 percentage points to 6.5%. For 2024 and 2025, expectations increased by 0.1 percentage points to 5.9% and 5.6%, respectively. 

Between the first and second quarter surveys, the annual rate of increase for headline consumer inflation trended down from 7% in February 2023 to 6.3% in May. 

Analysts foresee the lowest inflation rate among the three social groups over all three years, while business people expect the highest rate. Trade unions are not far behind firms. 

In contrast to the rising expectations for 2023 to 2025, average five-year-ahead inflation expectations ticked down to 5.2% from 5.5% in the previous survey. 

Households’ one-year-ahead inflation expectations surged from 7% in the first quarter of 2023 to 8.1% in the second quarter – the highest since 2010. 

Households also project higher medium-term inflation, with the five-year expectation increasing to 10.7% from 9.9%. 

In Q2 2023, on average, the three social groups downscaled their expected real GDP growth this year to 0.6%. This is notably lower than the 1% anticipated during Q1 2023. 

For 2024, the average growth expectation is 1.4%, essentially unchanged from the 1.5% expected before. The survey respondents lowered their salary and wage growth forecast in 2023 and 2024.

Whereas they previously expected wages to rise by 5.3% this year, this was trimmed to 5%. Wage growth of 5% is also pencilled in for 2024.


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