South African official inflation edges up
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.