South Africa’s inflation rate rose more than economists forecast to the highest in four months as a weaker rand increased the cost of imports, boosting the case for the Reserve Bank to keep borrowing costs unchanged tomorrow.
Inflation accelerated to 5.6 percent last month from 5.5 percent in September, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 23 economists was 5.4 percent. Prices rose 0.6 percent in the month.
“The bank has been expecting a food-price effect,” Elize Kruger, an economist at KADD Capital in Johannesburg, said in a telephone interview. “It will reinforce an unchanged monetary policy stance.”
South Africa’s Reserve Bank will leave the benchmark repurchase rate at 5 percent, the lowest level in more than 30 years, as a weaker rand and rising food and fuel prices threaten to push inflation higher, according to all 23 analysts surveyed by Bloomberg. The central bank targets inflation of 3 percent to 6 percent.
The government has raised the price of gasoline by 12 percent in the past year as oil surged and the currency fell against the dollar. Corn has gained 22 percent on the Chicago Board of Trade in the same period. White corn, a staple in South Africa, gained 14 percent in the second half of the year. The rand dropped 9.2 percent this year, the second-worst performer of 16 major currencies tracked by Bloomberg.
For every one percentage point decline in the currency, the inflation rate rises as much as 0.2 percentage point, according to Standard Bank Group Ltd.
The rand weakened 0.7 percent to 8.9070 a dollar at 10:22 a.m. in Johannesburg. The yield on the rand debt due in 2021 rose 2 basis points, or 0.02 percentage point, to 6.66 percent. The yield on the forward-rate agreements due as soon as four months rose 5 basis points to 4.9 percent after the data was released, the biggest gain since Oct. 8.