Inflation jumps to 5-year high, breaks through Reserve Bank target range

© stokkete/123rf.com

| Bruce Whitfield talks to Kevin Lings (Chief Economist, Stanlib Asset Management) about the latest CPI numbers.

South Africa's annual consumer price inflation has jumped to a five-year high.

CPI rose to 6,5% in May from 5,9% in April and March.

Inflation unchanged at 5.9% ahead of interest rate decision

This means it broke through the upper limit of the South African Reserve Bank’s (Sarb's) monetary policy target range which is 4-6%.

This is the highest reading since January 2017 when the rate was 6,6% says Statistics South Africa.

Steep increases in transport and food and non-alcoholic beverages accounted for just over half of the annual rate says Stats SA.

Bruce Whitfield gets comment from Kevin Lings, Chief Economist at Stanlib Asset Management.

I think the Reserve Bank is **mostly** in control of inflation... They're certainly going to be putting up interest rates again... 50 basis points seems likely after today's number.

Kevin Lings, Chief Economist - Stanlib Asset Management

I thought it was a bit of a shock increase because you suddenly had food inflation going up to almost 8%, and clearly there's more pressure in that system so we're going to see food prices go up...

Kevin Lings, Chief Economist - Stanlib Asset Management

... and then we know that the petrol price is going to move up considerably over the next couple of months and that's going to add additional pressure.

Kevin Lings, Chief Economist - Stanlib Asset Management

Another factor that can't be ignored says Lings, is that wages are also set to move up above the target range.

"Certainly unions are going to be demanding - I think - double digit wage increases, although they may end up settling a little below that."

While South Africa's inflation rate is currently below that of many other countries, we can expect a phase of much higher inflation he says.

Listen to Lings' analysis below:

This article first appeared on CapeTalk : Inflation jumps to 5-year high, breaks through Reserve Bank target range

More in Multimedia