South African Inflation Accelerates to Breach 6% TargetMike Cohen
South Africa’s inflation rate accelerated to 6.1 percent in April, exceeding the central bank’s maximum 6 percent target and bolstering the case for higher interest rates.
Inflation quickened from 6 percent in March, the Pretoria-based statistics office said. The median estimate of 30 economists surveyed by Bloomberg was for inflation to be unchanged. Prices rose 0.5 percent in the month.
The combination of a slowing economy, partly due to mining strikes, and faster inflation is creating a dilemma for the central bank. Twenty-six of the 30 economists surveyed by Bloomberg predict the bank will keep the benchmark repurchase rate at 5.5 percent tomorrow, with the others forecasting an increase of 25 or 50 basis points. The bank’s last rate increase was in January.
“The central bank was already expecting a breach of its upper tolerance band of 6 percent in the second quarter, so today’s print should not come as a surprise,” Abbas Ameli-Renani, an emerging-markets strategist at Royal Bank of Scotland Group Plc in London, said by e-mail. “At the margin, it slightly increases chances of a 25 basis-point rate hike tomorrow, although our base case is for no change.”
The rand rose 0.3 percent to 10.4152 against the dollar as of 1:14 p.m. in Johannesburg, taking its gain this year to 0.7 percent. Yields on the government bond due December 2026 fell 2 basis points to 8.18 percent.
The core inflation rate, which excludes food, non-alcoholic beverages and gasoline costs, was unchanged at 5.5 percent.