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South African inflation rises to 5.3%

Published on 24/08/2011

South Africa's inflation rate rose to 5.3 percent in July, after 5.0 percent in June, officials said Wednesday, casting doubt on how policymakers will respond to growing signs of an economic slowdown.

The figure is near the top of the central bank’s target range of three to six percent, putting the bank in a tricky position as it tries to bolster the economy against a global downturn without triggering high inflation.

The central bank has held its key interest rate at 5.5 percent since November in a bid to boost the economy’s sluggish recovery from a 2009 recession — the first since the end of apartheid for Africa’s largest economy.

Reserve Bank Governor Gill Marcus this week raised expectations of a further rate cut at the bank’s next monetary policy committee meeting in November, saying the global economy was moving “perilously close towards a precipice” and that policymakers would “react accordingly” in case of a downturn.

But the bank is also facing pressure to begin raising the benchmark interest rate again after slashing it nine times since December 2008 from a starting point of 12 percent.

Officials have forecast inflation will reach six percent by the end of the year.

The economy grew 4.8 percent in the first quarter but has struggled to add jobs to help cut a 25.7 percent unemployment rate.