South Africa’s inflation rate rose to its highest level in almost two years in May, driven by higher energy prices linked to the US-Israeli war with Iran.
Consumer prices increased 4.5% from a year earlier, compared with 4% in April, Statistics South Africa said. The reading was below the 4.7% median estimate in a Bloomberg survey of 18 economists.
Core inflation, which excludes volatile items and is watched for signs of wider price pressure, rose to 3.8% from 3.6% in April. The South African Reserve Bank targets inflation at 3%, with a 1 percentage-point tolerance band on either side.
The inflation increase follows the central bank’s decision last month to raise the benchmark rate to 7% from 6.75%. The move was aimed at limiting second-round effects from higher fuel and food costs.
Still, falling energy prices after an interim US-Iran deal to reopen the Strait of Hormuz may give policymakers room to hold rates in July. Governor, Reserved Bank of South Africa, Lesetja Kganyago said earlier this month that the bank would decide meeting by meeting, while keeping its focus on low and stable inflation.
