South African inflation expectations for the next two years fell in the fourth quarter, edging closer to the central bank’s new 3% inflation target.

Average inflation expectations two years ahead — the gauge monetary policymakers prefer for setting borrowing costs — dipped to 3.7% in the last three months of 2025 from 4.2% previously, according to a survey published by the Stellenbosch-based Bureau for Economic Research on Friday.

The survey is the first since Finance Minister Enoch Godongwana’s formal endorsement last month of the central bank’s new 3% inflation target — with a one-point tolerance band on either side — a shift long advocated by Governor Lesetja Kganyago.

The central bank chief announced the monetary policy committee’s preference for inflation to settle at 3% in July. The MPC’s previous target band of 3% to 6% had been in place for 25 years.

The drop in expectations may give officials ammunition to press ahead with their easing cycle at their first rate meeting of the year in late January, provided inflation remains subdued.

Economists surveyed by Bloomberg expect inflation to accelerate to 3.7% in November from 3.6% a month earlier.

At their November meeting, policymakers cut the benchmark rate by 25 basis points to 6.75%, bringing cumulative reductions since the easing cycle began last year to 150 basis points.

At the time, Kganyago said the MPC wants longer-run expectations to anchor at 3%, staying there even when there are shocks.