© Reuters. A woman uses a trolley as she shops at a Pick n Pay store at the Dobson Point Shopping Centre, in Soweto, South Africa, March 19, 2024. REUTERS/Siphiwe Sibeko/File photo
JOHANNESBURG (Reuters) – South Africa’s consumer inflation ticked up for the second month in a row in February, moving closer to the central bank’s upper target, which economists say could mean a longer wait for rate cuts this year.
Headline consumer inflation rose to 5.6% year on year from 5.3% in January, Statistics South Africa data showed.
Key contributors to the annual inflation rate included food, housing, transport and miscellaneous goods and services, which include medical insurance, according to its report.
The South African Reserve Bank, which targets inflation of between 3% and 6%, will announce a monetary policy decision next week.
The higher inflation print was considered a surprise by some analysts, who said this could further delay interest rate cuts by the central bank.
“The news doesn’t bode well for expectations of rate cuts in our local economy for the first half of 2024,” said Shaun Murison, senior market analyst at IG.
A February poll showed the central bank is expected to wait until at least the third quarter of this year before announcing any rate cuts.
David Omojomolo, Africa Economist at Capital Economics, said the stronger-than-expected inflation number gave impetus to the central bank to hold until after the national elections on May 29.
“Officials will want to see some clarity in the make-up of the next government and the direction of fiscal policy before feeling comfortable lowering interest rates,” Omojomolo said.
Core inflation, which excludes food and fuel prices, accelerated in February to 5.0% in annual terms from 4.6% in January.
