A Selected History of South African Inflation Perceptions: The Question Matters

Abstract

This paper provides a selected historical overview of inflation perception surveys undertaken in South Africa between 2006 and 2010 with a view to assessing the nature of the link between inflation perceptions and inflation expectations in the latest 2012 survey. These surveys are undertaken to assess the perceptions of respondents on the degree in which historic inflation figures reflect perceptions of actual inflation, and to find some link to inflation expectations. All the earlier pilot studies on inflation perceptions and the representative samples undertaken between 2006 and 2010 (in total six pilot studies, three representative samples and one survey among central bank employees) failed to show any link between inflation perceptions and inflation expectations. These findings cast some doubt on the premise that a policy of inflation targeting anchors inflation expectations in the current rate of inflation and therefore in the announced inflation target policy rate. In response to the earlier survey results, the question on inflation perceptions was put in different ways to respondents in the most-recent (2012) inflation perception survey to retest the hypothesis that inflation perceptions and inflation expectations are linked. The findings of this survey are analysed in this paper. These findings show a possible link to inflation expectations, and will be the subject of further research. The conclusion on the assessment of inflation perceptions is that the question matters. DOI: 10.5901/mjss.2014.v5n23p126