Concern over ’higher than anticipated’ inflation

"Annual consumer inflation jumped to 7.4 percent in June from 6.5 percent in May," the statistics agency, StatsSA, said in a statement.

"The June rate is the highest reading since May 2009 (8.0 percent) when the economy was facing the headwind of currency depreciation during the global financial crisis."

Inflation has soared to the highest level in decades in many countries, fuelled by the war in Ukraine and the easing of Covid restrictions.

That has forced central banks to raise interest rates, risking the prospect of recession as higher borrowing costs hurt businesses and consumers. 

South African economist Thabi Leoka said the June increase was "much higher" than analysts had anticipated.

She said the central bank was expected to hike its benchmark interest rate by half a percentage point on Thursday.

That would mark the second consecutive 50 basis points hike, after the bank brought its repo rate up to 4.75 percent in May in the steepest increase in years.

Monetary policymakers of Africa's most industrialised power had sought to keep inflation within a range of three to six percent. 

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Fuel prices in the country were up by 45.3 percent in June, marking the largest annual increase since 2009, according to StatsSA.

Prices of food and non-alcoholic beverages were instead up 8.6 percent year-on-year, with bread and cereals up 11.2 percent, while oils and fats jumped 32.5 percent driving the surge, it said.

"Higher commodity prices have fed through to increases in food and energy inflation, but core inflation has also been rising steadily," David Rees, senior emerging markets economist at investment management firm Schroders, said in a statement. 

Rees said there were concerns that inflation was yet to reach its peak across emerging markets at a time where countries were already under pressure as investors increasingly priced in a global recession.

In South Africa, while petrol and diesel inflation was projected to "come off quite sharply" in the second half of the year, "there appeared to still be upside risks to food inflation," he added.