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SA inflation hits highest level for 2015

| Economic factors

South Africa's consumer inflation rate rose to 4.6% in May, the highest level this year and 0.1 of a percentage point higher than the corresponding annual rate of 4.5% in April 2015.

On average, prices increased by 0.3% between April 2015 and May 2015, Statistics SA announced on Wednesday.

The core inflation rate, which excludes food, non-alcoholic beverages, fuel and electricity costs, rose to 5.7% in May from 5.6% in April.

The food and non-alcoholic beverages index increased by 0.6% from April to May, while the annual rate decreased to 4.7% in May from 5.0% in April.

The components in the food and non-alcoholic beverages index contributing to the increase were fish (2.6%); bread and cereals (1.9%); other food (1.7%); sugar, sweets and desserts (1.3%); oils and fats (1.2%); cold beverages (0.9%); milk, eggs and cheese (0.7%); and hot beverages (0.1%).

The components which decreased were fruit (-4.6%) and vegetables (-1.4%).
The  transport index increased by 0.3% between April 2015 and May 2015. The annual rate lifted to -0.7% in May from -1.1% in April.
The provinces with an annual inflation rate lower than or equal to headline inflation were Gauteng (4.6%), North West (4.5%), Eastern Cape (4.4%), Mpumalanga (4.2%), KwaZulu-Natal (3.7%) and Limpopo (3.4%). The provinces with an annual inflation rate higher than headline inflation were Western Cape (5.1%), Free State (5.1%) and Northern Cape (4.8%).

Jacques du Toit, property analyst at Absa Home Loans, said headline consumer price inflation is forecast to rise for the rest of the year, with interest rates to be hiked before year-end and through 2016.

The South African Reserve Bank (Sarb) has kept the repo rate unchanged at 5.75% since July 2014, but has cautioned that the risks to inflation have increased. 

On June 12 Sarb deputy governor Daniel Mminele warned at a monetary policy conference in Johannesburg that the bank could change its monetary stance because of rising risks to the inflation outlook and a likely rate hike in the US by year-end.

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