SA firms see inflation quickening before rate decision | Business

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South African inflation expectations rose at the start of 2023, suggesting the central bank may keep interest rates higher for longer. | News24_Business

Average inflation expectations for the year increased to 6.3% in the first quarter from 6.1% previously, according to a survey conducted by the Stellenbosch-based Bureau for Economic Research. The rate of price-growth for 2024 is now seen at 5.8%, and will probably slow to 5.5% a year later, the poll of analysts, business people, labor unions and households shows. Average five-year inflation expectations remain unchanged at 5.5%.

The results of the survey influence decision making by the South African Reserve Bank’s monetary policy committee, which prefers to anchor inflation expectations close to the 4.5% midpoint of its target range. In January, it saw consumer-price growth averaging 5.4% in 2023 and Governor Lesetja Kganyago affirmed the central bank’s commitment to inflation targeting and ensuring price stability.

The central bank has delivered 375 basis points of tightening since November 2021, with January’s 25-basis-point move — the smallest increase in five meetings — taking it closer to ending the hiking cycle. The benchmark repurchase rate stands at 7.25%. Forward-rate agreements used to speculate on borrowing costs show traders are now pricing in a 56% chance of 25 basis-point increase in the key rate on March 30. That’s declined in line with

of slower tightening by developing market central banks including the Federal Reserve after the collapse of US lender Silicon Valley Bank and stress in Credit Suisse Group AG.

 

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