The sensitivity of South African inflation expectations to surprises
Stellenbosch Working Paper Series No. WP16/2009Publication date: 2009
Author(s):
Price stability is widely recognised as the primary goal of modern monetary policy, and the management of private sector inflation expectations has become an essential channel through which this goal is achieved. This evaluation aims to improve the understanding of how the sensitivity of private sector inflation expectations to macroeconomic surprises in South Africa compares internationally, as this provides an indication of the contribution of monetary policy in South Africa to anchoring inflation expectations. If a central bank is credible, the financial markets should react less sensitively to macroeconomics surprises, because they trust the central bank to manage these incidents and achieve the objectives they communicated over the medium to long term. In this paper, the methodology of Gurkaynack, Sack and Swanson (2005a) is adopted in order to measure the sensitivity of South African inflation expectations to surprises. A comparison of South Africa’s results with those of countries in the original studies supports the contention that the SARB (South African Reserve Bank) has encouraged inflation expectations to be relatively insensitive to macroeconomic surprises, and offers support for the inflation targeting framework as a means to help anchor inflation expectations.
JEL Classification:E31, E52, E58
Keywords:South Africa, Inflation targeting, Macroeconomic surprises, Sensitivity of inflation expectations
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16 May 2025 Trade truce lifts markets, SA braces for winter load-shedding and budget reckoningThis week, data showed that South Africa’s unemployment rate rose in 2025Q1, with net job losses compared to 2024Q4. Meanwhile, mining output improved in March but declined overall for the quarter. In the US, inflation eased to a four-year low, while Germany’s economic sentiment rebounded sharply. The UK economy posted impressive growth in Q1; however,...
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Upcoming Seminars
Monday 26 May 202512:00-13:00
Prof Simon Franklin: Queen Mary University In London
Topic: "No Place Like Home? The Causal Effect of Housing Clearances in Central Addis Ababa"
12:00-13:00
Dr Dawie van Lill: South African Reserve Bank & Stellenbosch University
Topic: "TBC"
12:00-13:00
Prof Hylton Hollander: University Of Cape Town
Topic: "TBC"
BER Weekly
16 May 2025 Trade truce lifts markets, SA braces for winter load-shedding and budget reckoningThis week, data showed that South Africa’s unemployment rate rose in 2025Q1, with net job losses compared to 2024Q4. Meanwhile, mining output improved in March but declined overall for the quarter. In the US, inflation eased to a four-year low, while Germany’s economic sentiment rebounded sharply. The UK economy posted impressive growth in Q1; however,...
Read the full issue