Inflation accelerates in October, as expected
The sharp increase in the fuel price contributed to the rise in the consumer price index
Inflation accelerated slightly to 5.1% in October from 4.9% in September, matching the economists’ consensus.
Inflation was expected to accelerate due to October’s R1/l petrol price and R1.24/l diesel price increases.
Stats SA reported on Wednesday that September’s consumer price index (CPI) came to 109.4 points, up from 103.9 in October 2017 and 108.9 points in September 2018.
Inflation, as measured by the annual change in CPI, is the key measure used by the Reserve Bank’s monetary policy committee to set interest rates. The committee is scheduled to announce its next interest rate decision on Thursday.
Half of the economists polled by Bloomberg expected a rate hike while the other half expected the repo rate to remain unchanged.
Although inflation remains well under the Reserve Bank’s 6% ceiling, concern that inflation will continue rising may prompt the Bank to raise its repo rate from 6.5% to 6.75%. The monetary policy committee has made it clear that it would prefer inflation around the 4.5% midpoint of the 3%-6% target range.
The 0.2 percentage point increase in inflation matched the consensus of a poll of economists done by Trading Economics.
The fuel component showed an increase of 22.8% compared with a year ago, and a 6.1% increase compared with the previous month.
Stats SA reported the food component of CPI showed inflation of 2.9%.
Average fruit prices fell by 4.2% in October from the same month in 2017.
Vegetable prices, however, rose 7%.