South Africa’s inflation rate rose less than economists forecast to 4.7% in June, prompting investors to pare bets of an interest rate increase tomorrow.
Inflation accelerated from 4.6% in May, the Pretoria-based statistics office said on its website on Wednesday. The median estimate of 24 economists surveyed by Bloomberg was 5%. Prices rose 0.4% in the month.
Analysts are divided on whether the Reserve Bank will increase its benchmark rate for the first time in a year from 5.75% on Thursday. While a weaker rand and rising electricity costs are putting pressure on inflation, the economy is struggling to recover from the slowest expansion since the 2009 recession.
Forward rate agreements starting in one month, used to speculate on rates, fell 5 basis points to 6.25% as of 10:06 a.m. in Johannesburg. The rand fell 0.2% to 12.3518 against the dollar.
Seventeen of the 31 economists surveyed by Bloomberg predict an increase in the benchmark rate of 25 basis points, while the rest say it will stay unchanged.
Inflation is forecast by the central bank to breach the 3% to 6% target next year. Deputy Governor Daniel Mminele said in an interview on July 7 that policy makers have little flexibility to continue keeping the key rate on hold.
Core inflation, which excludes food, non-alcoholic beverages, gasoline and electricity costs, slowed to 5.5% in June from 5.7% in the previous month.