Inflation expectations climb before Reserve Bank's next rate decision | Business

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South African inflation expectations rose for the next two years, providing impetus for the central bank to extend its most aggressive rate-hiking cycle in decades. | News24_Business

The rate of price growth, spurred by the worst global inflation shock in a generation, has breached the target ceiling since May 2022 and the midpoint for more than two years.

The central bank’s MPC has raised the key interest rate by 475 basis points to 8.25%, its highest level in 14 years, since it started tightening in November 2021. Governor Lesetja Kganyago and his deputy Kuben Naidoo said this week that once the MPC is confident that inflation is returning to the midpoint of the target range, and thus expectations become anchored, it will stop hiking.

Forward-rate agreements starting in a month — used to speculate on borrowing costs — show traders are pricing in a more than 60% chance that the MPC will hoist the repurchase rate by 25 basis points on July 20. Average five-year inflation expectations fell to 5.2% from 5.5%, the BER said. The survey was conducted between June 12 and 29.In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month.

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