South Africa’s consumer inflation increased for the second time in a row in February, inching closer to the Central Bank’s upper target. Economists in the country stated this could imply longer waits for rate cuts.
According to Reuters, headline consumer inflation rose to 5.6% year on year from 5.3% in January, Statistics South Africa data showed.
The key contributors to the annual inflation rate included food, housing, transport and miscellaneous goods and services, which include medical insurance, according to its report.
The South African Reserve Bank, which targets inflation of between 3% and 6%, will announce a monetary policy decision next week.
Some analysts considered the increase in inflation to be a surprise, saying that further interest rate cuts by the Bank of England may have to wait.
The Senior Market analyst at IG, Shaun Murison said “The news doesn’t bode well for expectations of rate cuts in our local economy for the first half of 2024.”
The February survey indicated that the central bank was likely to hold off on any rate cuts for a minimum of the third quarter of this year.
Also, commenting on this development, said the David Omojomolo, said stronger-than-expected inflation number gave impetus to the central bank to hold until after the national elections on May 29.
“Officials will want to see some clarity in the make-up of the next government and the direction of fiscal policy before feeling comfortable lowering interest rates,” Omojomolo noted.
South Africa general election will take place on 29 May 2024 to elect a new National Assembly and provincial legislature for each province.
In February, core inflation increased to 5.0% on an annual basis from 4.6% in January, with the exception of food and fuel prices.
Prices for food and non-alcoholic beverages alone grew at a slower rate of 6.1% in February from last year, and those for housing and utilities increased by 5.8%.
The annual price growth in transport costs accelerated to 5.4% from 3.6%, which is largely attributed to the overall increase in inflation.
