During the course of 15 years of deflation, the public’s behavior has been based on the assumption that prices would either decline or be unlikely to rise. It is necessary to eliminate deflationary expectations through the Bank’s strong commitment and intelligible explanation.
Some particular factors stand out, which were highlighted in the last issue of the SARB’s Monetary Policy Review. First, the decline in food inflation that began in early 2017, as crops recovered from a drought-induced plunge a year earlier, lasted longer than most projections had anticipated. Part of this positive surprise reflected a continued decline in global food commodity prices.