Analysts’ forecasts that interest rates would remain steady next month were bolstered by South Africa’s September inflation, which increased significantly but remained within the central bank’s target range.
According to Statistics South Africa, the food, gasoline, and transportation sectors accounted for the majority of the increase in headline consumer inflation, which increased to 5.4% year over year in September from 4.8% in August.
Core inflation, which does not include the cost of food and gasoline, decreased from 4.8% in August to 4.5% in September on an annual basis. Inflation is targeted by the South African Reserve Bank (SARB) to be between 3% and 6%, with the middle of that range being preferred.
Headline inflation, according to economist Elize Kruger, is probably going to stay around 5% until the third quarter of 2024, but the current level of interest rates was sufficiently restrictive. “The SARB will keep rates unchanged at this level for a pro-longed period, before a first cut in interest rates would be considered,” she said.
Additionally, Kruger issued a warning, saying that the country’s chicken problem will only have an effect on food inflation in the October print.
The greatest avian flu epidemic to hit South Africa in recent memory has affected the country’s supply of chicken and eggs for meat. While many grocery stores are restricting the quantity of eggs customers may purchase, millions of hens have been put down.
A precise inflation path is becoming more unpredictable, as the SARB cautioned on Tuesday, citing a strengthening of upside risks to inflation over the previous several months.
According to Investec analyst Annabel Bishop, the rand currency and gasoline costs are threats to inflation’s forecast, which is predicted to average 5.8% this year and 4.6% the next. “There are likely to be no further hikes in South Africa’s interest rate cycle,” Bishop said.
Following ten straight rate increases to combat inflation, the central bank held rates steady during its last two policy sessions.