Business

Inflation accelerates to a near five-year high

Rene Vollgraaff

Inflation in Africa's second biggest economy has bust out of the Reserve Bank's target band again in May.

The Reserve Bank kept its benchmark repurchase rate unchanged at 5.5% even as it forecast inflation would stay outside the target band until the second quarter of next year. (Gallo)

South Africa’s inflation rate climbed to 6.6% in May, the highest in almost five years and exceeding the central bank’s target for a second month.

Inflation accelerated from 6.1% in April, Pretoria-based Statistics South Africa said on its website on Wednesday. The median estimate of 25 economists surveyed by Bloomberg was 6.5%. Prices rose 0.2% in the month.

The Reserve Bank kept its benchmark repurchase rate unchanged at 5.5% last month even as it forecast inflation would stay outside the 3% to 6% target band until the second quarter of next year. 

Africa’s second-biggest economy is threatened with recession after a 20-week platinum strike caused gross domestic product to contract an annualised 0.6% in the first three months of the year.

The inflation data “will most certainly continue to highlight the Reserve Bank’s current dilemma of managing an uncomfortable domestic inflation environment amid a weakening economic backdrop”, Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities in Johannesburg, said in an emailed note to clients before the release of the data.

The core inflation rate, which excludes food, non-alcoholic beverages, petrol and electricity costs, was unchanged at 5.5% in May. – Bloomberg

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