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    Home»News»Inflation moves outside target band

    Inflation moves outside target band

    News By Agency Staff19 October 2016
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    inflation-640

    South Africa’s inflation accelerated to above the upper end of the central bank’s target band in September, but climbing less than expected and reinforcing policy makers decision to keep the benchmark rate unchanged since March.

    The rate climbed to 6,1% from 5,9% a month earlier, Statistics South Africa said in a report released on Wednesday in Pretoria. The median estimate of 21 economists surveyed by Bloomberg was for 6,2%. Prices rose 0,2% in the month.

    The Reserve Bank has left its key rate unchanged at its past three meetings to help support an economy forecast to expand at 0,4% this year, the slowest pace since a 2009 recession, even as it projected a temporary acceleration in inflation due primarily to low base effects from a year earlier.

    The bank had raised borrowing costs by 2 percentage points to 7% since January 2014 to limit price growth to within its 3% to 6% target band.

    “The secondary target breach is already part of the Reserve Bank’s official forecast,” Carmen Nel, an economist at FirstRand’s investment banking unit, said by phone from Cape Town before the release of the data. “You would probably have to see the rand weaken toward R15 or above R15 versus the dollar for a reassessment to the upside in terms of the inflation outlook.”

    The Reserve Bank anticipates inflation to return to within the target by the second quarter of 2017. It briefly dipped within the band in July and August.

    The rand was little changed at R13,89/US$ at 10.11am in Johannesburg on Wednesday, taking its appreciation this year to 11%. Yields on rand-denominated government bonds due in December 2026 dropped five basis points to 8,77%.

    Core inflation, which excludes food, non-alcoholic beverages, energy and gasoline, slowed to 5,6%, lower than the 5,7% median estimate of 13 economists.  — (c) 2016 Bloomberg LP

    • Reported with assistance from Simbarashe Gumbo
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