South Africa Inflation Quickens to 6.4% in October From Year Ago

  • Borrowing costs forecast to remain unchanged on Thursday
  • Economy to expand at the slowest pace this year since 2009

South Africa’s inflation accelerated to an eight-month high in October as food prices climbed.

The rate increased to 6.4 percent from 6.1 percent a month earlier, Statistics South Africa said in a report released Wednesday in the capital, Pretoria. That’s the highest rate since February. The median estimate of 19 economists surveyed by Bloomberg was for inflation of 6.3 percent. Prices rose 0.5 percent in the month.

The South African Reserve Bank has kept its key lending rate unchanged since March as price growth slowed from the 7 percent peak in February and the economy is forecast by the government to expand at the slowest pace this year since a 2009 recession. While inflation expectations have plunged since the start of the year, political uncertainty that causes rand volatility, including attempts to prosecute Finance Minister Pravin Gordhan for fraud, remains a risk to the price outlook.

“What the SARB cares about is the inflation number going forward,” Gina Schoeman, an economist at Citigroup Inc. in Johannesburg, said by phone before the release of the data. “The fact that the peak of inflation happens now in the fourth quarter of the year is painful for the consumer, so GDP growth should slow down.”

The rand weakened 0.2 percent to 14.1077 per dollar by 10:08 a.m. in Johannesburg on Wednesday. Yields on rand-denominated government bonds due December 2026 fell two basis points to 8.94 percent.

The central bank forecasts inflation will return to its 3 percent to 6 percent target band sustainably in the second quarter of 2017. Governor Lesetja Kganyago will probably keep the benchmark repurchase rate unchanged when he announces the MPC’s decision on borrowing costs Thursday, according to the median estimate of 19 economists surveyed by Bloomberg.

Food prices, which have been pushed up by the worst drought in more than a century, rose 12 percent from a year earlier and 0.9 percent from the month before, according to the statistics office.

Core inflation, which excludes food, non-alcoholic beverages, energy and gasoline, quickened to 5.7 percent from 5.6 percent. The median of nine economist estimates was for an unchanged number.

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