South Africa: CPI Races to 5.9 Percent, Posing a Fresh Dilemma for Reserve Bank Ahead of Rate Decision

Stoked by rising food prices, South Africa’s Consumer Price Index (CPI) accelerated to 5.9% in October from 5.4% in September. This outpaced market expectations and brings CPI to the top of the SA Reserve Bank’s 3% to 6% target range just ahead of its next interest rate decision. The central bank is expected to hold rates steady, but the latest CPI read will give it pause for thought.

South Africa remains in the grip of a cost-of-living crisis, with food prices once again accelerating and driving the overall Consumer Price Index (CPI) number higher.

The CPI sped up to 5.9% in October from 5.4% in September, Statistics South Africa (Stats SA) said on Wednesday. This exceeded the Bloomberg consensus forecast of 5.6%, with food inflation a key driver.

This will not be lost on the Monetary Policy Committee (MPC) of the South African Reserve Bank when it renders its next verdict on interest rates on Thursday. The MPC is widely expected to keep the repo rate steady at 8.25% and prime at 11.75%, which would be its third consecutive hold after 18 months of hikes that raised lending rates by 475 basis points.

The SA Reserve Bank is typically not swayed by one data set and has its eye firmly on future inflation expectations. Still, it will be concerned by CPI’s upward moves since July when it reached its 2023 low of 4.7%, near the midpoint of the central bank’s 3% to 6% target range. And the rise since July is not just one data set, but three months on the trot of quickening inflation which has brought…