© Reuters. A customer compares prices while shopping at a Pick and Pay shop in East London, in the Eastern Cape province, South Africa, March 17, 2023. REUTERS/Siphiwe Sibeko
By Bhargav Acharya
JOHANNESBURG (Reuters) – South Africa’s inflation rose slightly more than expected in February, a further indication that rolling power cuts nationwide may be fueling price pressures, data showed on Wednesday.
South Africa’s headline consumer inflation rose to 7.0% year-on-year in February from 6.9% in January, Statistics South Africa said.
On a month-on-month basis, consumer inflation was at 0.7% in February compared to -0.1% in the previous month.
Analysts polled by Reuters had predicted the year-on-year figure to come in at 6.9% and month on month at 0.6%.
South Africa has been dealing with rotational power cuts on a daily basis, hampering businesses and economic growth in Africa’s most industrialized economy.
“The rise… may be a sign that the intensification of loadshedding (power cuts) in recent months is fueling price pressures,” Capital Economics said in a research note.
The South African Reserve Bank targets inflation of between 3% and 6%.
The central bank’s Monetary Policy Committee (MPC) raised rates by a smaller than forecast 25 basis points in January as it lowered its economic growth forecasts over the crippling power cuts.
The bank, which has raised interest rates at its last eight monetary policy meetings to tame inflation, said inflation is expected to sustainably fall to the midpoint of its target range by the fourth quarter of 2024.
“So long as renewed fears about the global banking system do not flare up, the Reserve Bank will almost certainly press ahead with a final 25 basis points interest rate hike at next week’s MPC meeting,” the note added.
Market focus will be on the US Federal Reserve’s policy meeting, which will end later in the day, with investors awaiting clarity on the path the US central bank could take in the wake of a global banking turmoil.
Core inflation, which excludes prices of food, non-alcoholic beverages, fuel and energy, was at 5.2% year on year in February, from 4.9% the previous month.
On a month-on-month basis core inflation stood at 0.8% in February, compared to 0.2% in January.