SOUTH Africa's annual inflation rate breached the 5percent mark in July for the first time since September last year on the back of high fuel prices, bringing an interest rate hike into play.
Statistics South Africa (Stats SA) said yesterday that annual inflation accelerated to 5.1percent last month from 4.6percent in June and slightly above market expectations of a 5percent rise.
The Stats agency said the annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, advanced to 4.3percent in July from 4.2percent in the previous month. Petrol prices grew at the fastest pace in six years in July as a result of higher global oil prices.
Yasemin Engin, an economist at Capital Economics, said while the rise in July's inflation figures added risk to the possibility of a rate hike this year, he expected that the SA Reserve Bank (Sarb) would keep policy on hold.
“Markets are pricing a rate hike in the fourth quarter of this year. We think this is unlikely, as the pass-through from the weakness in the rand is not very strong,” Engin said.