Forward-rate agreements show Reserve Bank could hike rate by as much as 50 basis points after consumer prices rise to four-month high
Traders held bets that SA’s central bank will increase interest rates this year after inflation quickened to a four-month high in September.
Data from Stats SA shows the annual inflation rate climbed to 5%, from 4.9% in August. That matched the median estimate of 14 economists in a Bloomberg survey. Consumer prices advanced 4.8% in the third quarter, in line with the Bank’s forecast. The main drivers of the prices rises were food and non-alcoholic beverages, transport, housing and utilities, Stats SA said. Core inflation, which excludes the prices of food, non-alcoholic drinks, fuel and electricity, remained benign, suggesting there is little demand pressure in an economy that’s slowly recovering from its deepest contraction in at least 27 years.
The misalignment between market pricing and economists’ expectations illustrates the dilemma facing central banks. Policymakers worldwide are debating whether faster inflation linked to pandemic-induced supply-chain disruptions is transient or something more persistent.
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