Transport was the largest contributor to the headline rate, with annual inflation in the sector reaching 10.8% and adding 1.5 percentage points to the total. Housing and utilities contributed 1.3 points, with inflation at 5.2%, while insurance and financial services added 0.6 points at 5.4%. The rise in transport costs is attributed to a 5.3% month-on-month jump in petrol prices, driven by a 14.1% increase in global oil prices and a 1.7% depreciation of the rand against the US dollar. Nedbank, which had forecast a higher 4.8% inflation rate in its Weekly Monitor, noted that fuel inflation is expected to rise from 20% to approximately 27%.
Food prices, a key component of the CPI, saw a mild acceleration to 1.0% in September, up from 0.7% in previous months. The increase was driven by higher costs for fish, seafood, dairy products, eggs, and oils and fats. Analysts cited global palm oil price increases due to dry weather in Southeast Asia and supply blips in seafood as factors. Conversely, cereal products and fruit and nuts remained in deflation, keeping overall food inflation relatively low. Meat price inflation is softening as domestic supplies remain adequate, supported by ongoing slaughtering activity and a cattle vaccination campaign that has alleviated fears of foot-and-mouth disease.
The South African Reserve Bank (SARB) has responded to the inflationary pressure by raising interest rates to 7.25% in the previous quarter. Governor Lesetja Kganyago has emphasized the bank’s intent to steer inflation back to its 3% target, describing the current stance as “firefighting” to prevent the surge from becoming entrenched. The SARB stated it would “act decisively” to contain the rise. Market expectations, reflected in forward-rate agreements, currently imply two additional rate increases over the next year as policymakers weigh the impact of energy and food costs.
The data release occurred on the same day as Finance Minister Enoch Godongwana tabling the Medium-Term Budget Policy Statement (MTBPS). While headline inflation came in lower than expected, core inflation is projected by Nedbank to firm from 4.0% to 4.4% as the indirect effects of higher fuel costs filter through the broader economy. The SARB’s next monetary policy decision and subsequent inflation data will be critical in determining whether the bank proceeds with further tightening measures.
