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South African Inflation Rate Climbs More Than Expected

South Africa’s inflation rate rose for a second month in September to 5.5 percent, more than economists expected, as fuel and food prices climbed and a weaker rand boosted import costs.

Inflation accelerated from 5 percent in August, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 20 economists was 5.2 percent. Prices rose 0.9 percent in the month.

The Reserve Bank left its benchmark interest rate unchanged at 5 percent on Sept. 20, after reducing it by half a percentage point in July, concerned that rising food and fuel costs will drive up prices in the economy. The bank’s target is to keep inflation within a range of 3 percent to 6 percent.

“There is more pressure building up because of imported inflation coming through the weak rand, food inflation rising and fuel inflation going up,” Colen Garrow, chief economist at Johannesburg-based Meganomics, said in a telephone interview. “Policy will be on hold at the Reserve Bank.”

Bonds fell after the data was released. The yield on the rand bond due in 2021 rose 5 basis points to 6.67 percent, while the yield on the 2015 security increased 4 basis points to 5.44 percent.

Gasoline Prices

Oil prices have gained 16 percent in New York in the 12 months through September, prompting the government to raise gasoline costs by 1.9 percent in October and 8.4 percent in September. Corn has gained 28 percent on the Chicago Board of Trade during the same period, while white corn, a staple in South Africa, has increased 3 percent on the South African Futures Exchange.

The yield gap between fixed-rate debt due in 2017 and similar maturity inflation-linked securities, a measure of inflation expectations, rose 3 basis points to 5.53 percentage points after today’s data.

The rand’s depreciation is adding to pressure on inflation. The currency has dropped 6.2 percent against the dollar since Sept. 27 when Moody’s Investors Service cut the nation’s rating by one level to Baa1. That’s the biggest decline of more than 160 currencies tracked by Bloomberg over that period.

The currency erased a gain after the inflation data, dropping 0.2 percent to 8.7816 per dollar at 10:34 a.m. in Johannesburg.

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