By Ukumbi Afrika |
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Johannesburg— South Africa’s annual inflation accelerated more sharply than expected in June, reinforcing expectations that the South African Reserve Bank (SARB) will raise interest rates for a second consecutive meeting on Thursday.
Headline consumer inflation rose to 5.0% year-on-year in June, up from 4.5% in May, marking its highest level in two years, according to data released by Statistics South Africa on Wednesday. Economists surveyed by Reuters had forecast inflation to reach 4.7%.
The biggest driver of the increase was the transport sector, as fuel prices climbed sharply following the Iran war, making transport the largest contributor to both monthly and annual inflation growth.
Core inflation, which excludes volatile food and energy prices, also exceeded expectations, rising to 4.1% in June compared with economists’ forecast of 3.9%.
Rate Hike Expectations Strengthen
The South African Reserve Bank, which targets inflation at 3%, is due to announce its latest monetary policy decision on Thursday.
Even before the latest inflation figures, most economists polled by Reuters expected policymakers to increase interest rates.
“The table is laid for a 25 basis point hike in interest rates,” said independent economist Elize Kruger.
The case for tighter monetary policy has also been reinforced by a recent survey showing a sharp rise in household inflation expectations—an indicator closely monitored by the central bank.
In May, the SARB raised its inflation forecasts for 2026 to 4.4% from 3.7%, and for 2027 to 3.7% from 3.3%.
According to Razia Khan, economist at Standard Chartered, the stronger-than-expected inflation reading and worsening inflation expectations have effectively cemented the case for another rate increase.
“The unexpected upside surprise in the June CPI print, along with the deterioration in household inflation expectations, both seal the case for July tightening,” Khan said.
Source: Reuters
Reporter: Anathi Madubela & Nilutpal Timsina
Editing: Alexander Winning& Kirsten Donovan