South Africa’s targeted CPIX inflation measure vaulted to record high in August, official data showed on Tuesday, supporting the Reserve Bank’s decision last week to raise interest rates for the fourth time this year.
Statistics South Africa (Stats SA) said CPIX rose at an annual rate of 10,8% from 9,9% in July and exceeded market expectations of a 10,5% growth.
The index, which strips out home loans and their tax effects, has now surged out of its official three to six percent target for 2002 for 10 successive months. The month-on-month increase was 0,8% compared to 1,0%in July.
”The data supports the decision by the Reserve Bank to hike interest rates last week,” said Nedcor economist Magan Mistry.
The central bank raised its key repo rate by another 100 basis points to 13,50% last week, and issued a hawkish statement.
”The higher interest rates will slow spending in the economy in the months ahead, but the danger is that inflation is going to remain stubbornly high for the rest of this year,” said Mistry.
”Depending on how the rand and the oil price perform, there is danger that the Reserve Bank might raise interest rates again in November,” he said.
Stats SA said the all items consumer price index rose by an annual 11,6% from 10,6% in July and also beating forecasts of an 11,4% increase.
Bond yields spiked, with the yield on the benchmark R153 bond climbing 4,5 basis points to 11,84% and the shorter-dated R150 ticked up to 12,20% from 12,16%.
The rand was little changed at 10,61%.
Stats SA attributed the increases to the sharp surge in the food prices, which rose by an annual rate of 18,1% in August compared to 16,8% in July.
Food prices contributed more than a quarter of the CPI’s rate of 11,6% in August, with meat prices in the metropolitan areas increasing 30,6%, grain rising 21,3% and other food products gaining around 17,0%.
Core inflation rose 10% year-on-year against a 9,2%increase in July. – Reuters