South African Bonds Rally as Key Inflation Gauge Dips to Record Low

South Africa’s two-year inflation expectations fell to a record low, an encouraging sign for central bank policymakers ahead of next month’s rate meeting as they work to anchor views around the new 3% target. Africa’s largest economy’s bonds rallied.

Average inflation expectations two years ahead — the gauge monetary policymakers prefer for setting borrowing costs — dipped to 3.7% in the fourth quarter from 4.2% previously, according to a survey published by the Stellenbosch-based Bureau for Economic Research on Friday. That was the lowest level on records going back to 2000.