Inflation accelerates slightly more than expected in May

A median consensus forecast from a Business Day survey of six economists was for inflation to remain unchanged at 4.5%.

Prices increased by 0.3% between April and May.

The food and non-alcoholic beverages index increased by 0.6% between April and May while the annual rate decreased to 4.7% in May from 5% in April.

Oils; fats; sugar‚ sweets and desserts; hot beverages; milk‚ eggs and cheese; cold beverages; bread and cereals; fish; and meat all increased‚ while fruits and vegetables decreased.

The transport index increased by 0.3% between April and May. The annual rate was recorded at -0.7% in May from -1.1% in April.

The electricity tariff the National Energy Regulator of SA will grant Eskom later this month‚ for implementation next month‚ will play a major role in the inflation outlook. The Reserve Bank already sees inflation breaching the 3% to 6% target in the first quarter of next year.

Although most analysts still expect interest rates to rise later in the year‚ a rate hike next month would not come as a surprise.

Investec chief economist Annabel Bishop said the Reserve Bank’s tone at the last monetary policy committee meeting was decidedly hawkish‚ making a 25-basis-point hike in the repo rate in July quite likely.

“However‚ while this interest rate hike is quite likely to be delivered‚ it is coming at a time when economic growth is very weak and there is little evidence of demand-led inflation pressures threatening the target on their own‚” she said.

- BDlive