The inflation rate targeted by South Africa’s central bank quickened to 6,5% year-on-year in July, coming in above market expectations due to higher food prices.
Statistics South Africa said on Wednesday that CPIX (consumer inflation less mortgage costs) accelerated from 6,4% in June, beating the consensus forecast of a 6,1% rate. The all-items consumer price index (CPI) was steady at 7%.
Analysts said the figures did not bode well for the interest rate outlook in the near future.
”It doesn’t help the case for no further increase in interest rates at all, but this is a historical number now rather than something looking forward,” said Dennis Dykes, chief economist at Nedbank.
Since June last year the central bank has raised interest rates by 300 basis points to 10% in an effort to curb inflation, which has stayed above its 3% to 6% target range for the fourth month in a row, and some analysts predict another increase in October.
Statistics South Africa said food prices were the main culprit for the increase, with food inflation jumping to 10,2% in July from 9,5% in June.
Reserve Bank Governor Tito Mboweni said last week that prices were on an upward trend even without food and fuel prices, and interest rates were the only tool to tame inflation.
On a monthly basis, CPIX rose 1,1% compared with 0,5% growth previously, while the headline CPI increased 1% month-on-month.
Bonds weakened after the data, with yields on the benchmark 2015 issue going up by as much as 8,5 basis points to 8,5%, before retreating. — Reuters