South Africa Inflation Stays Firmly Within Target Band in August

JOHANNESBURG (Capital Markets in Africa) – South Africa’s inflation rate stayed firmly within the central bank’s target band in August, strengthening the case for more policy easing on Thursday.

Inflation quickened to 4.8 percent from 4.6 percent in July, Pretoria-based Statistics South Africa said Wednesday in a report on its website. The median estimate of 22 economists in a Bloomberg survey was for 4.9 percent. Prices rose 0.1 percent in the month.

The higher inflation is unlikely to keep the Reserve Bank from cutting its benchmark repurchase rate for a second consecutive time on Thursday. Price growth has been within the central bank’s 3 percent to 6 percent target band since April and while Africa’s most-industrialized economy emerged from a recession in the second quarter, gross domestic product is forecast to expand less than 1 percent this year.

Since the Monetary Policy Committee in July reduced its key rate by a quarter point to 6.75 percent, “the economic backdrop has remained conducive to further monetary easing,” Kamilla Kaplan, an economist at Investec Ltd., said in an emailed note before the data was released. “Weak economic growth, subdued private-sector credit dynamics and subsiding wage pressures will contribute to a continued absence of meaningful demand-led inflationary pressures.”

The Reserve Bank halved its 2017 GDP growth forecast to 0.5 percent in July and said inflation will probably stay in the target band until at least the end of 2019.

The rand strengthened 0.3 percent 13.2796 per dollar by 10.05 a.m. in Johannesburg on Wednesday. Yields on rand-denominated government bonds due December 2026 fell one basis point 8.41 percent.

Core inflation, which excludes the prices of food, non-alcoholic beverages, energy and gasoline, decelerated to a five-year low of 4.6 percent in August, from 4.7 percent in July.

Source: Bloomberg Business News