Inflation rises to 5.8% as rand depreciates

2014-02-19 11:14

South Africa’s inflation rate rose to 5.8% in January as the rand’s slump against the dollar boosted food and fuel costs.

Inflation accelerated from 5.4% in December, Statistics South Africa said.

The median estimate of 24 economists surveyed by Bloomberg was 5.7%. Prices rose 0.7% in the month.

The rand’s 22% plunge against the dollar since the start of last year, the worst among 16 major currencies tracked by Bloomberg, has boosted inflation expectations as import costs increase.

That prompted the Reserve Bank to raise its benchmark repurchase rate by half a percentage point to 5.5% last month, the first increase since June 2008.

“Much of the upward inflationary price pressures are stemming from food and fuel prices,” Kamilla Kaplan, an economist at Investec Ltd. in Joburg, said in an e-mailed note to clients before the data was released. The central bank “will likely continue to highlight the upside risks to the inflation outlook.”

Inflation will probably breach the central bank’s 3% to 6% target in the second quarter of this year and peak at 6.6% in the final three months of the year, Governor Gill Marcus said on January 29.

The core inflation rate, which excludes food, non-alcoholic beverages, gasoline and energy costs, was unchanged at 5.3% in January, in line with the median estimate of eight economists surveyed by Bloomberg.

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