SA’s May inflation rate hits target-range midpoint

South Africa’s annual inflation quickened in May, with the rate reaching the midpoint of the central bank’s target range as higher food and beverage prices contributed to the increase.

Annual consumer-price growth accelerated to 4.5% from a year earlier, compared with 4.4% in April, the Pretoria-based Statistics South Africa said Wednesday in a statement on its website. The median estimate of 17 economists in a Bloomberg survey was 4.4%.

Key insights

• Underlying price pressures are receding with annual core inflation, which excludes the cost of food, non-alcoholic beverages, fuel and electricity, stayed at 4.1%, matching April’s movement, which was the weakest pace of increases since March 2018.
• Inflation has remained within the central bank’s target band of 3% to 6% for more than two years, and the central bank left its key interest rate at 6.75% last month. Two of the five Monetary Policy Committee members favoured a cut, marking the first time in more than a year that anyone on the panel was in favour of lower rates.
• The MPC seeks to anchor inflation expectations at 4.5%. It sees price growth averaging 4.5% in 2019. The South African Reserve Bank’s forecasting model suggests there might be room for interest-rate cuts in the next year or two, given how weak the economy is, Governor Lesetja Kganyago said June 13.
• The rand weakened for the first time in five days, slipping 0.2% to 14.5466 per dollar at 10:57 am in Johannesburg.

What Bloomberg’s economist says: