Staff Writer 
South Africa’s two-year inflation expectations moderated marginally, welcome news for the central bank as the Iran war clouds the outlook.
Average inflation expectations two years ahead — the gauge monetary policymakers prefer for setting borrowing costs — fell to 3.6% in the first quarter from 3.7% previously, according to a survey published by the Stellenbosch-based Bureau for Economic Research on Monday.
The survey data was collected between February 16 and March 5.
Oil prices have surged, and the rand has weakened sharply since the US and Israel unleashed their war on Iran on February 28. South Africa is an oil importer, and higher prices and currency depreciation place upward pressure on costs.
The South African Reserve Bank targets inflation at 3% and is expected to hold interest rates steady at 6.75% when it meets next week.
Price expectations two years ahead are an important ingredient in its policy assessment, but the Middle East conflict adds a high level of uncertainty to any forecast, which argues strongly for policy caution.
The publication of the BER survey comes before the release of South Africa’s February consumer-price index on Wednesday. Economists surveyed by Bloomberg expect to the rate to decline to 3.1% year-on-year, compared with 3.5% the month before.
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