South Africa Inflation Rate Rises in May to Highest in 2015Rene Vollgraaff
South Africa’s inflation rate rose to 4.6 percent in May, the highest level this year as the rand weakened and the effect of lower oil prices dissipated.
Inflation accelerated from 4.5 percent in April, the Pretoria-based statistics office said on its website on Wednesday. The median estimate of 23 economists surveyed by Bloomberg was 4.5 percent. Prices rose 0.3 percent in the month.
While the central bank’s monetary policy committee has left its benchmark rate unchanged at 5.75 percent since July to support an economy that grew at the slowest pace last year since a 2009 recession, rising gasoline, electricity and food costs are putting pressure on prices. Deputy Governor Daniel Mminele said on June 12 the risks to inflation have increased and interest rates can’t stay unchanged indefinitely.
“Inflation is moving to the upper end of the central bank’s target because gasoline prices are rising and food prices are picking up,” Bart Stemmet, an economist at NKC African Economics, said by phone from Paarl near Cape Town on Wednesday.
If power utility Eskom Holdings SOC Ltd.’s application to raise its tariffs by as much as 25 percent is approved, “it will push the Reserve Bank’s inflation forecasts above the target band and that will force them to increase interest rates,” he said.
The Reserve Bank targets headline inflation of between 3 percent and 6 percent. The core inflation rate, which excludes food, non-alcoholic beverages, gasoline and electricity costs, rose to 5.7 percent in May from 5.6 percent in the previous month.
Retail sales grew 3.4 percent in April, compared with the median estimate of 2.1 percent, a separate report from the statistics office showed.
The rand weakened 0.6 percent to 12.4396 per dollar at 1:42 p.m. in Johannesburg. Forward-rate agreements starting in three months, used to speculate on borrowing costs, are pricing in 27 basis points of interest-rate increases by September, data compiled by Bloomberg show.
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