South Africa’s annual inflation rate ticked up to 7.6% in October from 7.5% in September, and is still in the upper limit of the Reserve Bank’s 3%-6% target range.
Koketso Mano, FNB senior economist, said October’s inflation print came in above the banking group’s prediction of 7.5% and the consensus expectation of 7.4%.
“We anticipate that headline inflation will continue moderating going into 2023, following the 7.8% peak in July,” Mano said.
“However, headline inflation will be sticky, supported by core inflation that is yet to peak and several risks that will introduce volatility. These risks include volatile international oil prices, as well as the weaker rand-dollar exchange rate, which could exacerbate the passthrough of elevated input costs.”
She explained further: “The [US] Federal Reserve hiked interest rates by 75 basis point [bps] at its November meeting and is expected to hike them by a further 50bps in December.
“This, along with concerns over unfolding second-round effects, should prompt further hiking by the Reserve Bank this week. We expect the pace of hikes to slow to 50bps, following 75bps hikes in each of the past two monetary policy committee [MPC] meetings, in line with the hiking cycle nearing a peak.”
October’s inflation data came a day before the MPC announces its decision on interest rates with many pundits expecting another hefty hike in the cost of borrowing.
Economists expect the MPC to raise interest rates by at least 50bps on Thursday.
The central bank raised its benchmark repo rate by 75bps to 6.25% at its September meeting, as widely expected.
This was the sixth consecutive hike since policy normalisation started in November 2021, to anchor inflation expectations more firmly around the mid-point of the target band and achieve the inflation target in 2024.
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