South African September Inflation Slows to 5.9% Below EstAmogelang Mbatha and Rene Vollgraaff
South Africa’s inflation rate fell to 5.9 percent in September to within the central bank’s target zone for the first time in seven months and easing pressure on policy makers to raise interest rates.
Inflation slowed from 6.4 percent in August, the Pretoria-based statistics office said on its website today. The median estimate of 27 economists surveyed by Bloomberg was 6.1 percent. Prices were unchanged in the month.
The Reserve Bank kept its benchmark repurchase rate unchanged at 5.75 percent last month even as a weakening rand threatened to keep inflation above the regulator’s 3 percent to 6 percent range. The economy is forecast to expand at the slowest pace this year since the 2009 recession after labor strikes forced mines and factories to temporarily halt operations. An 8 percent drop in Brent crude prices last month helped contain inflation.
“The oil price decrease, our largest import product has caused this slight deflation,” Francois Stofberg, an economist at Efficient Group Ltd., said by phone from Pretoria. “This is a good sign that the Reserve bank might not increase rates, but that is also dependent on the economic data that will come from the U.S. and China.”
Yields on government rand-denominated bonds due December 2026 fell five basis points to 7.97 percent, the lowest on a closing basis since Sept. 4, as of 11:05 a.m. in Johannesburg. Forward rate agreements starting in 12 months, used to speculate on interest rates, declined nine basis points to 6.85 percent, heading for the lowest close since Sept. 8. The rand strengthened 0.1 percent to 11.0365 per dollar, paring an earlier gain of as much as 0.3 percent.
The core inflation rate, which excludes food, non-alcoholic beverages, gasoline and electricity costs, fell to 5.6 percent in September from 5.8 percent in the previous month.