By Alexander Winning
JOHANNESBURG (Reuters) -South Africa’s headline consumer inflation quickened more than expected to 6.5% year-on-year in May, data showed on Wednesday, breaching the central bank’s target range for the first time in over five years.
Analysts polled by Reuters had predicted inflation would pick up to 6.2% in annual terms from 5.9% in April.
The South African Reserve Bank (SARB), which targets inflation of between 3% and 6%, has raised rates at its last four monetary policy meetings to try to cool price pressures, with last month’s move the first 50 basis point hike since 2016.
Statistics South Africa said May’s reading was the highest since January 2017.
Fuel and food prices continue to be the major drivers of inflation, as the war in Ukraine has sent global prices for commodities, such as crude oil and wheat soaring.
Analysts said the larger-than-forecast rise in May inflation strengthened the case for more interest rate hikes.
“The jump in inflation in May, coming alongside the hawkish turn at central banks in advanced economies, will probably shift the debate at July’s MPC meeting to a choice between a 50bp and 75bp increase in interest rates,” Jason Tuvey at Capital Economics said in a research note.
Razia Khan at Standard Chartered said Wednesday’s “shock” figure had taken inflation into a new range and predicted the central bank would react.
Core inflation, which strips out prices of items, such as food, fuel and energy, rose to a more modest 4.1% year-on-year in May, from 3.9% previously.
(Reporting by Alexander Winning; Editing by Estelle Shirbon and Tomasz Janowski)
