South Africa’s inflation rate fell more than predicted to an 11-month low, a drop that’s unlikely to sway the central bank from delivering a back-to-back 50 basis-point interest rate hike on Thursday. The rand pared earlier losses.
(Bloomberg) — South Africa’s inflation rate fell more than predicted to an 11-month low, a drop that’s unlikely to sway the central bank from delivering a back-to-back 50 basis-point interest rate hike on Thursday. The rand pared earlier losses.
Consumer prices rose an annual 6.8% in April from 7.1% the previous month, Pretoria-based Statistics South Africa said Wednesday in a statement on its website. The median estimate of 17 economists in a Bloomberg survey was 7%.
Those polled in a rate-decision survey unanimously predict the central bank will extend its longest phase of monetary tightening since 2006. Twenty economists forecast it will increase rates by another 50 basis points, one by three-quarters of a percentage point and three by 25 basis points. Most expect it to do so to keep inflation expectations anchored and alleviate pressure on the rand.
Forward-rate agreements, used to speculate on borrowing costs, show traders are pricing in about a 90% chance of a 50-basis-point hike this week, and another 50 points by year-end.
The rand reversed a decline to trade 0.1% stronger at 19.1786 per dollar by 10:15 a.m. in Johannesburg. The currency has depreciated 5.6% against the greenback since the monetary policy committee’s previous meeting on March 30. The yield on local-currency debt maturing in 2032 fell 9 basis points to 11.81%, snapping a six-day rising streak.
Persistent blackouts, the recent gray listing of the country by the Paris-based Financial Action Task Force and allegations by the US that Pretoria supplied weapons to Russia have all fed into rand weakness.
Read more: South African Rand’s Troubles Run Deeper Than Russia: Macro View
Inflation has been above the 4.5% midpoint of the central bank’s target range at which it prefers to anchor price-growth expectations since April 2021. The central bank has delivered 425 basis points of tightening since November 2021 to dampen inflation.
Governor Lesetja Kganyago said earlier this month that the depreciation has negated the impact of lower global energy and food costs on domestic inflation and the central bank stands ready to act to fulfill its “mandate to protect the purchasing power of the rand.”
Food and non-alcoholic beverage inflation slowed to 13.9% from 14% in March, according to Statistics South Africa. Core inflation, which excludes the cost of food, non-alcoholic drinks, fuel and electricity, quickened to 5.3% as rising health-insurance costs filtered into the data. The statistics agency surveys medical-insurance costs biannually in February and April.
–With assistance from Simbarashe Gumbo and Robert Brand.
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