Statistics South Africa figures released on Wednesday showed that on average, prices increased 0.6% between September and October. Inflation was recorded at 5.6% year on year in October, from a 5.5% year-on-year increase in September. The market was expecting a 5.5% print.
"We still think the Reserve Bank will find it very difficult to cut rates when inflation is rising notably and the rand is at risk of further depreciation. The safest option at this juncture seems to be to stay put," RMB economist Carmen Nel said.
As expected, the food and nonalcoholic beverages index and the transport index were mainly responsible for the jump in inflation.
The food index alone recorded a monthly increase of 2.8%, its highest monthly jump since August 1994.
Investec Group economist Annabel Bishop said "higher grain prices at the agricultural level fed through into higher bread and cereal prices, while meat and dairy prices also experienced upward pressure due to higher feed prices".
A petrol price increase of 21c a litre during the month led to higher fuel costs, which fed into the increase in the transport index.
Absa Capital economists expected the latest inflation figure to weaken the rand as it came in higher than anticipated.
The Reserve Bank is now widely expected to revise upwards its current forecasts which are for inflation to average 5.3% in the final quarter of this year, 5.2% next year and 5% in 2014. The bank has already cited higher food costs as an upside risk to the inflation outlook.
Higher food price inflation is expected to lead to a continued rise in headline inflation for the rest of this year.
Business Day
