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Perceptions and inflation expectations

- By Wits University

The Professional Provident Society (PPS) and Professor Jannie Rossouw, the Head of the School of Economic and Business Sciences (SEBS) at the University of the Witwatersrand (Wits), have recently completed their second comprehensive South African inflation survey.

This is a continuation of research on perceptions of historic inflation figures conducted by Rossouw in October 2014. This survey requests the same respondents to provide their perceptions of the accuracy of past inflation figures and their expectations of future inflation figures. According to Rossouw, the novelty of this approach is that it shows that a perception of past inflation anchors expectations of future inflation.

He adds that the linkage between past inflation and future inflation is important for monetary policy purposes under a system of inflation targeting as is followed in South Africa.

“Inflation targeting works best when past inflation anchors inflation expectations,” says Rossouw. “The general public acts in accordance with their expectations of future inflation and price increases, and they should therefore be educated about the measurement of inflation in any campaign to contain price increases.”

PPS included the questions in its February 2015 quarterly survey amongst South African professionals and will continue to do so in the future. “The results will provide dense and rich data that will be used extensively in academic research in future,” says Gerhard Joubert of PPS. “Quarterly surveys are distributed electronically amongst PPS members and the results are therefore free from any possible enumerator bias of influence.”

Read the full media release for more about the survey and its findings.