South Africa’s inflation rises sharply on food, fuel prices

AFRICAN BUSINESS AND ECONOMYOctober 19, 2023 at 12:56 AM UTC

In September, South Africa experienced a rise in its inflation rate, reaching a three-month high, primarily due to increased food and energy prices. This development reinforces the argument for the country's central bank to maintain higher borrowing costs for an extended period.

Annual inflation climbed to 5.4% from 4.8% in August, according to data from Statistics South Africa, based in Pretoria. However, core inflation, which excludes food and fuel costs, decreased to 4.5% year-on-year in September from 4.8% in August.

The South African Reserve Bank (SARB) aims to keep inflation within the 3% to 6% range, with a preference for it to hover around the midpoint of that interval. Economists anticipate that headline inflation is likely to stay above 5% until roughly the third quarter of 2024. Nevertheless, they believe that the current interest rate level is adequately restrictive.

Key Takeaways

Inflation, the increase in prices of goods and services over time, has emerged as a significant concern for numerous countries both within and outside of Africa this year. Inflation can have varying degrees and causes, but overall, it diminishes the purchasing power of individuals, impacts the economy, and even poses challenges for the government. The most recent inflation figures follow a warning from South Africa's central bank, issued on Tuesday, stating that the factors pushing inflation upward have strengthened in recent months. This has introduced greater uncertainty regarding the exact trajectory of inflation. The South African Reserve Bank had previously refrained from changing interest rates in its last two policy meetings, following ten consecutive rate hikes aimed at curbing inflation.

South Africa

Inflation

SARB

Consumer prices