Inflation breaches upper limit of Reserve Bank target

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Stats SA on Wednesday released May inflation figures.
Stats SA on Wednesday released May inflation figures.
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  • Consumer inflation for May ticked up to 6.5% from 5.9% in April.
  • This breaches the upper limit of the Reserve Bank's target range – which is between 4% to 6%.
  • Increases were mainly driven by food inflation, transport as well as housing and utilities prices.

Consumer inflation for May hit 6.5%, which breaches the upper limit of the Reserve Bank's target range of 4% to 6%.

Stats SA on Wednesday released the latest inflation data. This is the highest inflation rate since January 2017, when the inflation was 6.6%.

Stats SA said the uptick, from 5.9% recorded in April, was mainly driven by increases in food and non-alcoholic beverages, housing and utilities, transport and miscellaneous goods and services.

Consumer inflation increased 0.7% on a month-on-month basis.

Patrick Kelly, Stats SA's chief director of price statistics, explained that prices for food and non-alcoholic beverages jumped by 2.1% between April and May. This is the largest increase since February 2016, when South Africa was experiencing a drought.

The oils and fats food group, in particular, is facing "sustained levels" of high inflation, Kelly noted. The annual price increase for this group was 26.9% in May.

Annual increases in oil and fats have been above 10% since December 2020. On a month-to-month basis, prices for oils and fats jumped by 10.1% - the first time since 1997 that prices have increased by more than 10% in a single month.

Sunflower oil is almost 40% more expensive than a year ago, said Kelly. Prices for sunflower oil jumped by 16.1% between April and May.

Prices for bread and cereals increased by 3.4% between April and May - taking the annual rate to 8.4%.

The annual inflation rate for transport, meanwhile, hit 15.7%. The hike was mainly driven by fuel increases of 32.5%. 

Most economists had expected the May print to exceed 6%.

In a market update ahead of the data release, the Bureau for Economic Research said it is unlikely that May's inflation would be the peak.

FNB economists expect inflation to continue rising in June on the back of rising food and petrol prices.

At the SA Tomorrow 2022 conference on Tuesday, Reserve Bank Governor Lesetja Kganyago said that steps were taken as early as July last year to control inflation – at a gradual pace. In contrast, the US announced a significant rate hike of 75 basis points – its biggest hike since 1994, Fin24 reported.

Kganyago vowed that the bank would continue to manage inflation, especially in light of the sharp hikes introduced by major economies.

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