South African inflation accelerated to the highest level in 10 months in July, driven by higher fuel prices.
Consumer prices rose 5.1% from a year earlier compared with 4.6% in June, Pretoria-based Statistics South Africa said Wednesday in a statement on its website. That matched the median estimate of 16 economists in a Bloomberg survey.
While inflation has now been inside the central bank’s target band of 3% to 6% for more than a year, Governor Lesetja Kganyago has said the Monetary Policy Committee prefers price-growth expectations at 4.5% to limit the need for policy tightening. The five-year breakeven rate, a measure of traders’ inflation expectations, rose to the highest level in almost two months last week as the rand tumbled to the weakest level against the dollar since June 2016.
The price of gasoline was 25% higher in July than a year earlier as the rand slumped. Excluding fuel prices, inflation would’ve been 4.3% last month.
The MPC held its benchmark repurchase rate at 6.5% in July, citing the currency as a risk to the price outlook. Higher international oil prices will continue to push fuel inflation, the panel said. The Reserve Bank will announce its next policy decision on September 20.
“If the weakness we’ve seen in the rand is sustained that means we’re going to have that upward pressure in inflation,” Busisiwe Radebe, an economist at Nedbank, said by phone from Johannesburg. While the Reserve Bank is likely to take a wait-and-see approach next month “we do think that their next move, if they move, will be up and that’s probably in the second half of next year,” she said.
The rand weakened 0.2% to 14.41 per dollar by 11:12 am in Johannesburg.