South Africa’s main inflation gauges leapt in June in line with forecasts, sealing the case for another increase in interest rates at the Reserve Bank’s policy meeting next week.
The targeted CPIX inflation rate rose by 4,8% in the year to June after an annual increase of 4,1% in May, official data showed on Wednesday. It was the biggest increase since August 2005.
Figures from Statistics South Africa also showed that the all-items consumer price index (CPI) increased by an annual rate of 4,9% during the month versus 3,9% in May, also in line with expectations.
That was its highest level since August 2003.
Economists said the figures would probably help persuade the South African Reserve Bank to lift its key repo rate by half a percentage point at its next policy meeting on August 2 to 3.
”It is in line with expectations,” said Brait economist Colen Garrow. ”I think the Reserve Bank is probably going to use it as an excuse to put rates up next week. They will argue probably that some pre-emptive tightening is necessary.”
South Africa’s Reserve Bank raised its key repo rate by half a percentage point to 7,50% on June 8, warning that the inflation outlook had ”deteriorated markedly” and that CPIX would breach the upper end of its target range early in 2007.
The annual increase in the measure has remained inside its 3% to 6% percent target range for 34 consecutive months, and the June rate hike was the first since September 2002.
Most of the price pressures in Africa’s biggest economy are being fanned by higher prices of food, which accounts for more than a fifth of the inflation indices, and steep global oil prices, which are pushing up the cost of domestic fuel.
On a monthly basis, CPIX rose by 0,5%, slowing from 0,6% in May. Headline CPI rose by 0,8%, accelerating from 0,6% in the previous month.
A Reuters poll had predicted that CPIX would rise by 4,8% year-on-year and 0,5% month-on-month, while CPI was seen up by 4,9% year-on-year and 0,8% month-on-month. — Reuters