The post-pandemic inflation surge and South Africa’s recent adoption of a new 3%-point inflation target has renewed interest in the anchoring of private sector inflation expectations.

Ayrton Amaral, Anis Foresto and Pabalelo Mosoma

Using the Bureau for Economic Research’s disaggregated survey panel dataset for these private sector agents, we assess the evolution of anchoring over 25 years of inflation targeting (2000–2025) in South Africa.

Rather than relying on a single metric, we adopt a holistic approach that evaluates anchoring across five characteristics, and distinguishing between indicators useful for real-time anchoring analysis and those better suited for ex-post analysis.

Our results show, firstly, that distribution-based measures provide early warning signals of de-anchoring risks, whereas revision- and sensitivity-based measures are more informative ex-post to assess the effectiveness of policy decisions.

Secondly, expectations evolved from being weakly anchored in the first decade of inflation targeting to becoming increasingly stable at the 6% upper bound of the 3–6% inflation target range.

After the South African Reserve Bank’s (SARB’s) 2017 announcement, expectations shifted gradually towards the 4.5% target midpoint and became more firmly anchored there.

The surge in inflation during the 2021–2023 COVID-19 pandemic caused the anchor to drift only temporarily; a reassuring development given the relative severity of the inflationary shocks during this period.

Overall, these trends indicate a greater underlying stability in the formation of private sector agents’ inflation expectations in South Africa since the SARB’s adoption of inflation targeting.