South Africa’s inflation expectations have been trending downward, potentially influencing the South African Reserve Bank’s (SARB) monetary policy decisions. Inflation expectations for households decreased to 4.3% in the second quarter of 2025 from 4.6% in the first quarter[1]. More recent forecasts indicate a further drop to 3.9% for 2025, marking the first sub-4% inflation forecast in over four years[2][4]. This easing of inflation expectations could encourage the SARB to consider interest rate cuts, as seen with the recent 25 basis point reduction in the lending rate to 7.25%[4].However, economic growth concerns are rising, with forecasts for 2025 now at 0.9%, down from 1.2%[2][6].
For subsequent years, inflation forecasts are also decreasing. Inflation is projected at 4.3% for 2026 and 4.5% for 2027, down from previous estimates of 4.6% and 4.7%, respectively[2]. The SARB’s next monetary policy announcement is scheduled for July 31st, and these falling inflation expectations provide a strong case for further easing[2]. Despite this, economic growth pessimism persists, driven by underperformance in mining and manufacturing, which saw the economy grow just 0.1% in the first quarter of 2025[4].
Consumer Price Index (CPI) inflation in South Africa averaged 4.4% in 2024 and is expected to average around 3.5% in 2025, reflecting a modest inflation outlook[3]. The SARB aims to keep inflation within a 3% to 6% target, and recent inflation data shows that consumer inflation was at 2.8% in May 2025[4].
References
- [1] South Africa Inflation Expectations – Trading Economics
- [2] South Africa’s Inflation Expectations Ease, Raising Rate Cut Hopes
- [3] Inflation outlook: still modest in South Africa for 2025 – Investec
- [4] South African Inflation Outlook Cools As Growth Worries Rise
- [5] South Africa Economic Outlook – January 2025 | Press Release
- [6] Latest BER survey finds lower inflation expectations for this year and next – Engineering News
- [7] SA inflation expectations drop to near four-year low – Moneyweb
- [8] Inflation expectations almost at four-year low – The Citizen