South Africa Inflation Moves Outside Target Band in SeptemberBy
Inflation acceleration as expected, due to base effects
Reserve Bank forecasts economy to expand by 0.4% this year
South Africa’s inflation accelerated to above the upper end of the central bank’s target band in September, climbing less than expected and reinforcing policy makers decision to keep the benchmark rate unchanged since March.
The rate climbed to 6.1 percent from 5.9 percent a month earlier, Statistics South Africa said in a report released Wednesday in the capital, Pretoria. The median estimate of 21 economist’s surveyed by Bloomberg was for 6.2 percent. Prices rose 0.2 percent in the month.
The Reserve Bank has left its key rate unchanged at its past three meetings to help support an economy forecast to expand at 0.4 percent this year, the slowest pace since a 2009 recession, even as it projected a temporary acceleration in inflation due primarily to low base effects from a year earlier. The bank had raised borrowing costs by 2 percentage points to 7 percent since January 2014 to limit price growth to within its 3 percent to 6 percent target band.
“The secondary target breach is already part of the Reserve Bank’s official forecast,” Carmen Nel, an economist at FirstRand Ltd’s investment banking unit, said by phone from Cape Town before the release of the data. “You would probably have to see the rand weaken toward 15 or above 15 rand versus the dollar for a reassessment to the upside in terms of the inflation outlook”
The Reserve Bank anticipates inflation to return to within the target by the second quarter of 2017. It briefly dipped within the band in July and August.
The rand was little changed at 13.8899 per dollar at 10:11 a.m. in Johannesburg on Wednesday, taking its appreciation this year to 11 percent. Yields on rand-denominated government bonds due December 2026 dropped five basis points to 8.77 percent.
Core inflation, which excludes food, non-alcoholic beverages, energy and gasoline, slowed to 5.6 percent, lower than the 5.7 percent median estimate of 13 economists.
— With assistance by Simbarashe Gumbo