South Africa’s inflation rate, targeted by the central bank, quickened to 6,4% year-on-year in May, official data showed on Wednesday, strengthening the likelihood of an interest-rate rise in August. The annual CPIX measure — consumer prices minus mortgage costs — rose slightly above market expectations, and April’s increase, of 6,3%.
Statistics South Africa also said the headline CPI inflation rate rose by 6,9% year-on-year in May, a little below the consensus forecasts of 7%.
Analysts said with inflation still above the central bank’s 3% to 6% target band, there may be need for more interest rate hikes.
”I think it basically confirms that the bias is still on the upside on interest rates … the market is already pricing in a hike going into August,” said Monale Ratsoma, macro strategist at Absa Capital.
”This increases chances of another hike going into the meeting of October,” he added.
The Reserve Bank has raised its key repo rate by 250 basis points to 9,5% since June last year. It left rates unchanged in February and April, but a worsening inflation outlook, largely due to higher food and fuel prices, forced its hand in June.
Reserve Bank Governor Tito Mboweni said earlier this month there was a strong upward bias in inflation beyond high food and fuel prices and the country may have entered an interest-rate tightening phase.
Stats SA said on a monthly basis, CPIX rose by 0,6% compared with 1,2% growth previously, while headline CPI increased by 0,6% month-on-month. — Reuters