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(Updates with comment from economist in fourth paragraph.)
Nov. 24 (Bloomberg) -- The cost of goods leaving South African factories and mines rose 10.6 percent in October, less than economists forecast, giving the central bank room to keep its benchmark rate unchanged to support the economy’s recovery.
Producer-price inflation accelerated from 10.5 percent in September, Pretoria-based Statistics South Africa said on its website today. The median estimate of 15 economists surveyed by Bloomberg was 11 percent. Prices fell 0.3 percent in the month.
The Reserve Bank has kept its benchmark lending rate unchanged at a 30-year low of 5.5 percent this year, even as prices pressures increased. The rand’s 16 percent slump against the dollar in the six months through Oct. 31 is adding to producer costs. Consumer-price inflation reached the top of the central bank’s 3 percent to 6 percent target range last month.
“It’s a difficult balancing act because they are worried about the real economy as well,” Johann Els, an economist at Old Mutual Investment Group in Cape Town, said in a phone interview. The central bank is unlikely to raise interest rates “unless the rand blows out towards 9 or 10 to the dollar.”
The rand was at 8.5334 per dollar at 12:36 p.m. in Johannesburg from 8.5227 before the data was released and 8.5293 late yesterday. The yield on the R157 government bond, due 2015, fell 7 basis points, or 0.07 percentage points, to 6.97 percent today.
Rising oil prices and a weaker rand prompted the government to raise gasoline prices 3.5 percent last month, adding to producer costs.
The central bank will monitor price developments as it forecasts inflation to stay outside the target range until the fourth quarter of 2012, Governor Gill Marcus said on Nov. 22.
“In the current climate, we need to watch what’s happening rather than respond to it,” she said.
--Editors: Nasreen Seria, Gordon Bell
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