The most recent forecast suggests that inflation will average 4.8% this year, but is then expected to rise to 5.6% and 5.4% respectively in the coming two years. This upward drift will not help in our quest to get inflation and inflation expectations anchored closer to the midpoint of the target range.
However, because the deteriorating outlook is driven mainly by supply-side factors, the MPC will look through the first-round effects. The MPC will maintain its vigilance and will react should there be second-round effects that take inflation significantly away from the midpoint of the target range. Protecting and enhancing financial stability is now an explicit statutory mandate of the SARB.