South African inflation unchanged before key rate decision
South Africa’s inflation rate remained unchanged on the eve of a central bank interest rate announcement that’s dividing economists and traders.
Consumer prices rose 5% from a year earlier in October, the same as the previous month, Statistics South Africa said Wednesday in a statement published on its website. That matched the median of 18 economists’ estimates in a Bloomberg survey.
Headline inflation, driven by rising food costs and record-high fuel prices, has now breached 4.5% -- the midpoint of the central bank’s target range at which it prefers to anchor expectations -- for six consecutive months. That, coupled with warnings about upside risks to the inflation outlook could prompt the South African Reserve Bank to lift the benchmark interest rate Thursday and signal a more aggressive tightening cycle.
The implied policy rate path of the central bank’s quarterly projection model, which it uses as a guide, indicates a 25-basis point increase in the final quarter of this year and in every quarter of 2022 and 2023.
Of 20 economists in a Bloomberg survey, 11 predict a quarter-point increase in the benchmark this week, while the remainder see no change. Forward-rate agreements, used to speculate on borrowing costs, signal traders are pricing in about a 70% chance the rate will be raised to 3.75% on Thursday and suggest the central bank will unwind the unprecedented stimulus it’s provided since 2020 within two years.
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