South African inflation expectations for 2026 and 2027 have fallen after the government announced a new 3% inflation target. A survey conducted from November 17 to December 4 showed that the average forecast for inflation in 2026 is now 3.8%, down from 4.2%. Expectations for 2027 also decreased to 3.7% from 4.2%. This survey, commissioned by the South African Reserve Bank, included input from business leaders, trade union officials, and analysts.
Finance Minister Enoch Godongwana revealed the revised inflation target on November 12, seeking to improve economic competitiveness. The target replaces an older range of 3% to 6% and includes a 1% tolerance band for unexpected inflation spikes, aligning South Africa with global best practices. This move is expected to stabilize inflation expectations effectively.
Analysts in the survey were notably optimistic, predicting inflation at 3.5% for 2026 and 3.4% for 2027. Business representatives projected slightly higher inflation rates at 3.9% for both years, while trade union officials expected 3.9% in 2026 and 3.8% in 2027. These trends indicate a favorable market reaction to the government’s commitment to price stability.
The South African Reserve Bank has begun adjusting its monetary policy in response to this evolving scenario, cutting its key lending rate by 25 basis points on November 20. A further interest rate decision is set for January 29, 2026, with market participants closely watching the central bank’s strategies to meet the new inflation target.
Overall, the government’s decision to lower the inflation target is part of a broader strategy aimed at enhancing macroeconomic stability and encouraging economic growth, ultimately paving the way for reduced interest rates, promoting household spending and business investment over the medium to long term.
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