South Africa Inflation Rises to 4.4% But Analysts Still Expect Rate Hike
By Aboki Forex —
South African inflation picked up slightly in August, but the smaller-than-expected increase is unlikely to influence the central bank’s interest-rate announcement later on September 23. Headline inflation was 4.4% year-on-year, up from 4.3% in July and below the 4.5% average forecast in a Reuters poll of economists, Statistics South Africa said on Wednesday.
Rate decision in focus
Most economists expect the South African Reserve Bank to increase its monetary policy rate by 25 basis points to 7.25%. The decision is due around 3 p.m. local time (1300 GMT). The central bank targets inflation of 3% and tends to focus on the outlook for upcoming inflation readings rather than looking backwards.
South Africa’s central bank surprised investors and economists by keeping rates unchanged in July. It said its policy stance was restrictive enough to return inflation to target within two years.
“This has no impact on the MPC (Monetary Policy Committee) decision that we will hear later today. The MPC concluded its forecasting and modelling runs last week already,” said Johann Els, chief economist at PSG Financial Services.
What drove the increase
Statistics South Africa said the inflation increase was mainly driven by the housing and utilities, transport, and insurance and financial services categories.
Food and non-alcoholic beverages inflation was among the lowest categories at 1.1%. Analysts said strong crop production should help keep food price pressures contained despite risks from an anticipated El Nino weather event.
Annual core inflation, which strips out volatile items like food and energy, eased to 4.1% in August. That was slightly below economists’ forecast of 4.2%.