South Africa September Inflation Uptick Limits Room for Rate Cuts

JOHANNESBURG (Capital Markets in Africa) – South African inflation quickened for a second consecutive month in September, reducing room for the nation’s central bank to ease policy.

The inflation rate rose to 5.1 percent from 4.8 percent the previous month, Pretoria-based Statistics South Africa said in a report on its website on Wednesday. The median of 24 economist’s estimates in a Bloomberg survey was 5 percent. Prices rose 0.5 percent in the month, the highest monthly rate since March.

The Reserve Bank unexpectedly kept its benchmark repurchase rate unchanged at 6.75 percent at its September meeting after easing policy for the first time in five years in July. The Monetary Policy Committee cited concerns about higher inflation expectations even as it forecast price growth at an average of 5.3 percent or less until at least the end of 2019. The MPC will announce its next rates decision on Nov. 23.

While the economy emerged from a recession in the second quarter, gross domestic product is projected to expand only 0.6 percent this year. Despite subdued domestic demand, elevated uncertainty limits the scope for additional rate cuts, central bank Deputy Governor Daniel Mminele said this week.

Lower-than-potential economic growth must “be weighed against both the upside risks to inflation and the stubbornly high level of inflation expectations,” he said.

Core inflation, which excludes the prices of food, non-alcoholic beverages, energy and gasoline, was unchanged at 4.6 percent in September.

Source: Bloomberg Business News