South African official inflation edges up

23rd January 2013, Comments 0 comments

Consumer prices in South Africa edged still higher in December, posing a headache for the country's central bank as it meets to discuss efforts to kick-start Africa's largest economy.

Statistics South Africa reported that the consumer price index increased 5.7 percent from the level a year ago, higher than the 5.6 percent rate seen in November.

Prices for food, housing and transport all rose, further pressuring hard-hit South Africans.

The data comes as the South African Reserve Bank huddles to discuss what they can do to turn lacklustre growth into something more likely to address sky-high unemployment.

The increase in inflation towards the upper end of the bank's own inflation target rage gives it a little less wiggle room to juice the economy through a cut in interest rates.

"There is a good chance of a breach of the upper end of the inflation target around the mid-year," said Razia Khan, head of regional research at Standard Chartered Bank.

Although that breach is likely to be short-lived, Khan forecast that interest rates would be kept on hold "throughout 2013."

"(It) goes to show how drawn out the economic crisis has been for South Africa."

A rate cut could cause further price rises and edge the country closer toward a toxic mix of high prices and low growth known as stagflation.

In the third quarter of 2012 the South African economy grew at a measly 1.2 percent.

The central bank's decision is expected on Thursday.


© 2013 AFP

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