There is “no evidence” that inflation pressures in South Africa are becoming entrenched, South African Reserve Bank Deputy Governor Daniel Mminele said.
While recent supply shocks have put upward pressure on inflation, price expectations aren’t becoming “less anchored,” Mminele said, according to the copy of a speech in Cape Town today, published in the central bank’s website.
Policy makers in Africa’s biggest economy, led by Governor Gill Marcus, kept the benchmark lending rate at a 30-year low of 5.5 percent last month as they struggle to support domestic economic growth, while keeping price increases in check.
The risks to the country’s growth outlook are on the downside as job cuts weigh on consumer spending and a weaker global economy undermines production, while the depreciation of the rand “brought to the fore the potential upside risk” to inflation, Mminele said.
The currency plunged 14 percent against the dollar last month, the most in almost three years and the second-worst performer among the 16 major currencies tracked by Bloomberg. The rand dropped 1.1 percent to 8.0498 per U.S. dollar at 12:27 p.m. today.
The inflation rate will probably breach the top end of the central bank’s 3 percent to 6 percent target in the fourth quarter before returning to the target in the second three months of next year, Mminele said. Consumer prices increased 5.3 percent in August from a year earlier, according to the country’s statistics agency.