South Africa’s Producer-Price Inflation Unchanged in May

South African producer prices rose 6.6 percent in May from a year earlier, more than economists forecast, adding to pressure on the central bank to keep interest rates unchanged.

The cost of goods leaving factories and mines rose at a the same pace as in April, Pretoria-based Statistics South Africa said on its website today. That was above the 6.3 percent median estimate nine economists surveyed by Bloomberg. Prices gained 0.5 percent in the month.

The Reserve Bank has left its benchmark repurchase rate unchanged at 5.5 percent since November 2010 to help support Africa’s biggest economy while keeping price pressures in check. Governor Gill Marcus said on June 8 the rand’s depreciation is the main risk to inflation, making it difficult for the central bank to lower borrowing costs as global growth slows.

“The risks emanate from a weaker exchange rate, which could see PPI pick up in the latter part of the year,” Shireen Darmalingam, an economist at Standard Bank Group Ltd. in Johannesburg, said in an e-mailed note to clients. “We maintain that interest rates will remain on hold through to the second half of 2013.”

Consumer-price inflation slowed to 5.7 percent in May, near the top of the bank’s 3 percent to 6 percent target range.

The rand dropped 8.8 percent against the dollar to 8.523 in May, driving up producers’ costs of imported goods by 8.3 percent, the statistics agency said. The currency was at 8.42 against the dollar as of 1:15 p.m. in Johannesburg, little changed from 8.4247 before the data was released. The yield on the R157 bond due in 2015 fell 2 basis points to 6.01 percent.

Traders are increasing bets that the bank will cut rates by the end of the year as inflation slows and the European debt crisis curbs economic growth. The yield on the forward-rate agreement due in December fell 27 basis points to 5.25 percent in the past month.

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