South African Inflation Overshoots, Cementing Rate-Hike Bets

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Or sign-in if you have an account.Street vendors in the central business district in Pretoria. Photographer: Leon Sadiki/Bloomberg Photo by Leon Sadiki /Bloomberg(Bloomberg) — Traders hardened bets that the South African Reserve Bank will raise interest rates after annual inflation quickened more than expected in June. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountConsumer prices rose 5% compared with 4.5% in May, Pretoria-based Statistics South Africa said in a statement on its website Wednesday. That exceeded the median estimate of 4.7% in a Bloomberg survey of 17 economists.Most economists in a separate Bloomberg survey conducted before the inflation release see the central bank lifting interest rates by another 25 basis points to 7.25% on Thursday. Forward rate agreements – used to speculate on borrowing costs – are almost completely pricing in a quarter point increase.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againJohann Els, chief economist at PSG Financial Services, took a contrarian view and said that the SARB could opt to stand pat. He argues that there wasn’t sufficient evidence of spillovers into broader prices from energy-adjacent categories to warrant tightening on Thursday, though it may act later in the year. “There is very little, in fact almost no second-round signs in the data. The upside surprise did not come from second-round effects from petrol into other stuff,” Els said. “This data might just influence the hawkishness in the statement: So talk tough, but don’t do it yet.”Expectations for a hike have strengthened after renewed US-Iran tensions brought traffic through the Strait of Hormuz to a virtual standstill, lifting energy and fertilizer prices. The increase in import costs has made it less likely that inflation will return to the central bank’s 3% target as quickly as Governor Lesetja Kganyago had suggested before the escalation.Another concern will be inflation expectations. Average expectations two years ahead — the measure the MPC closely watches when setting interest rates — rose to 3.9% in the second quarter from 3.6% previously.Kganyago previously said bringing expectations back to target remains a priority for the monetary policy committee.The biggest contributors to the worse-than-expected outcome were higher transport, housing and utility, insurance and financial services costs.Sign up here for the daily Next Africa newsletter and subscribe to the Next Africa podcast on Apple, Spotify or anywhere you listen.—With assistance from Simon Lee.This advertisement has not loaded yet.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.