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South Africa sees inflation spike to four-month high before interest rate call

South Africa sees inflation spike to four-month high before interest rate call

South Africa's inflation has shot up to its highest level in four months, which might make the central bank more likely to keep interest rates steady at its next meeting.

- South Africa's inflation has shot up to its highest level in four months.
- In February, the consumer price index surged to 5.6% year-on-year, up from 5.3% in the previous month.

- In February, inflation for food and non-alcoholic beverages eased to 6.1%. 

In February, the consumer price index surged to 5.6% year-on-year, up from 5.3% in the previous month, according to a statement by Pretoria-based Statistics South Africa on Wednesday.

Per the report, the rise in the annual inflation rate was driven by increases in food, housing, transport, and miscellaneous goods and services, which also cover medical insurance.

Food inflation
In February, inflation for food and non-alcoholic beverages eased to 6.1%. While most categories saw reduced annual rates, hot beverages and oils & fats experienced exceptions.

The increase in the rate for hot beverages was fueled by annual price hikes for instant coffee (up 12.1%), black tea (up 10.1%), and Rooibos tea (up 8.1%).

Interest rate
The uptick in inflation means the rate has moved further away from the 4.5% midpoint of the South African Reserve Bank's target range, where it prefers to anchor expectations, Bloomberg reported.

The South African Reserve Bank, which targets inflation of between 3% and 6%, will announce a monetary policy decision next week.

"The stronger-than-expected reading for February gives further excuses for the SARB to delay its easing cycle until after the election," which will be held on May 29, David Omojomolo, Africa economist at Capital Economics, said in a research note. "As things stand, we now expect the first cut to be delivered in September. Even then, the specter of uncertain fiscal policy will remain and could delay easing further."

Source: Businessinsider Africa


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