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South Africa’s consumer inflation rose by 4,3 percent in August, compared to 4 percent  in July.

This is slightly higher than expected: economists polled by Bloomberg had predicted an increase of 4,2 percent .

Annual food inflation reached its highest level in 18 months, registering 3,8 percent  in August, Statistics SA reported. This was mostly due to a 8,6 percent increase in bread and cereal prices — the highest annual inflation reading for bread and cereals since February 2017, when the rate was 12,8 percent.

Mealie meal prices have seen a sharp hike. Super maize was almost 18 percent  more expensive in August compared with the same month last year. Special maize prices jumped by 27,5 percent  over the same period.

Oil-based food items – such as cooking oil and margarine, which are derived mainly from sunflowers – also saw a sharp jump. While annual inflation for oils and fats is currently at 4,4 percent, monthly inflation came in at 2,2 percent  in August, the biggest monthly jump since January 2016.

Fish prices also on an upward trend

Annual fish inflation was 7,5 percent  in August, with tinned fish (excluding tuna) 8,7 percent  more expensive than it was a year ago.

While inflation has remained at or below the 4,5 percent midpoint of the central bank’s target band every month since December, the surge in oil prices following a drone strike on Saudi Arabian oil facilities could add upward pressure on price growth if it leads to an increase in gasoline and diesel cost. Fuel makes up 4,6 percent  of South Africa’s inflation basket.

August’s higher-than-expected inflation number is expected to give the SA Reserve Bank’s monetary policy committee pause for thought as they started their deliberations on interest rates yesterday.

The committee is set to make its announcement this afternoon. The chances of a 25 basis point cut fell to 50 percent  yesterday from 72 percent  on September 13 before the attack, according to Bloomberg calculations.

All but four of the 18 economists in a Bloomberg survey forecast the central bank will maintain the rate at 6,5 percent. The MPC will likely today also update its oil-price assumptions and inflation forecast for the year, which are currently at $67 per barrel and 4,4 percent .

Rand reaction

The local currency had a “fairly muted reaction” to the consumer inflation data, said Lukman Otunuga, senior research analyst at FXTM.

“Investors seem more concerned with the volatility in the oil markets and how this will impact the SARB interest rate decision,” he said in a note to clients.

At 11:15, the rand was trading at 14.63 to the dollar, up 0,5 percent  on the day. – Bloomberg.