CAPE TOWN: Inflation expectations increased in the second quarter, which the Reserve Bank’s monetary policy committee (MPC) is likely to be concerned about.
The MPC deliberates on inflation expectations during its meetings and higher inflation expectations are considered an indication of rising future inflation — one of the factors supporting an interest rate increase. The Bureau for Economic Research (BER) said the average inflation expectation for this year increased from 5.4% to 5.6% in the second quarter, while the average for next year rose from 5.9% to 6.1%.
Analysts, businesspeople, trade union representatives, and households are surveyed for their inflation expectations. While analysts and businesspeople revised their forecasts upwards, trade union officials scaled their forecasts downwards by a tiny 0.1 percentage points since the first quarter. Analysts’ inflation expectations for this year at 5% remained much lower than those of businesspeople at 6.2%, and trade union officials at 5.6%.
Whereas businesspeople forecast inflation to average 6.4% next year, trade union officials and analysts expected 5.8% and 6.0%, respectively. Average five-year inflation expectations increased from 5.8% to 6%.
