Africa-Press – South-Africa. South African annual inflation accelerated less than expected on the eve of a widely expected interest-rate cut.
Consumer prices rose 3.6% in October, compared with a 3.4% increase a month earlier, Pretoria-based Statistics South Africa said in a statement on its website on Wednesday.
The median estimate of 14 economists in a Bloomberg survey was 3.7%. Prices climbed 0.1% in the month, against forecasts for a 0.2% rise.
Most economists in a separate Bloomberg survey conducted before Wednesday’s data release predicted the central bank’s monetary policy committee will resume its easing cycle on Thursday, after South Africa’s National Treasury last week formally adopted the monetary authority’s new 3% inflation target in its medium-term budget.
The MPC’s previous 3%-to-6% target range had been in place for a quarter of a century.
Traders maintained bets on a a cut at the MPC’s last meeting of the year on Thursday, with forward-rate agreements pricing in a 72% probability of a 25 basis-point cut.
The Treasury’s endorsement gives “strength to the signal” that the country is moving toward a lower inflation norm, Keabetswe Mojapelo, macroeconomist at Rand Merchant Bank, said before Wednesday’s data.
“That alignment should help guide expectations down over time and increase the likelihood of a 25 basis-point cut” this week to 6.75%, he said.
Finance Minister Enoch Godongwana said last week “the new target will anchor inflation at permanently lower levels,” and “reduce the cost of living and borrowing costs.”
Prices for the transport, recreation, sport & culture, and alcoholic beverages and tobacco categories increased at faster rates, Stats SA said. The annual rate for transport turned positive after 13 months of deflation because of higher fuel prices.
Inflation cooled for several categories, most notably food and non-alcoholic beverages, easing to 3.9% from 4.5% as vegetables, fruits & nuts and sugar prices softened.
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