South African Inflation Accelerates as Food Prices Climb
South African inflation accelerated to a seven-month high of 5.7 percent in December as food prices rose, supporting expectations the Reserve Bank will keep borrowing costs unchanged tomorrow.
The inflation rate climbed from 5.6 percent in November, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 23 economists was 5.7 percent. Prices advanced 0.2 percent in the month.
All 21 economists surveyed by Bloomberg predict the Reserve Bank will keep the benchmark repurchase rate at 5 percent tomorrow to support the economy while curbing price pressures from a weaker rand and rising food costs. The central bank’s goal is to keep inflation within a range of 3 percent to 6 percent.
“Food prices have been creeping higher, housing, fuel and power and transport have been pressured, but core inflation remains well-behaved,” Razia Khan, the London-based head of Africa economic research at Standard Chartered Plc, said in e- mailed comments. “With a substantial negative output gap, policy will remain accommodative for some time. We see interest rates on hold throughout 2013.”
The rand has dropped 4.6 percent against the dollar since the beginning of the year, the worst performer of 16 major currencies tracked by Bloomberg. The price of wheat increased 4 percent on the South African Futures Exchange in the period.
The rand traded at 8.8794 at 10:46 a.m. in Johannesburg, up from 8.8903 before the release of the inflation data. The yield on the government’s 6.75 bonds due March 2021 dropped 2 basis points to 6.4 percent.
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