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Inflationary pressures intensify in South Africa

Xinhua, March 8, 2016 Adjust font size:

Inflationary pressures in South Africa have intensified in the recent months, against the generally subdued growth in economic activities, the country's central bank said on Tuesday.

Headline consumer price inflation breached the upper limit of the inflation target range in January, and is expected to remain outside the target throughout the year, the South African Reserve Bank (SARB) said.

The acceleration in headline consumer price inflation mainly reflected the delayed response of food price inflation to the severe drought conditions and the sharp depreciation in the exchange rate of the rand towards the end of 2015 when investor confidence retreated, said the bank.

Consumer goods price inflation quickened noticeably over the period, driven mainly by movements in petrol price inflation, the SARB said.

Against the background of a steady uptick in most measures of producer and consumer price inflation, the inflation expectations of business and trade union representatives were adjusted upwards towards the end of 2015, exceeding the six percent level by an even bigger margin, it said.

Also on Tuesday, Minister of Agriculture, Forestry and Fisheries, Zokwana, said the government was trying to ensure that consumers be protected from what is termed as any unreasonable price increases.

The minister called on consumers to brace themselves for a possible increase in the price of chicken due to factors including the current severe drought.

Responding to the risk of higher inflation, the Monetary Policy Committee (MPC) of the SARB raised the repurchase rate by 25 basis points in July 2015 and by another 25 basis points in November.

Given the subsequent notable deterioration in the inflation outlook, the MPC decided in January this year to raise the policy rate by a further 50 basis points to 6.75 percent per annum, effective from 29 January this year. Endit