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Inflation quickens, but rate hike still unlikely

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South Africa’s headline inflation pulled further away from the central bank’s target range in June, data showed on Wednesday, but analysts said the increase was probably not enough to justify mortgage hike immediately.

While pursuing its mandate of containing inflation, the Reserve Bank is cautious adding further strain on an economy which contracted while in the first quarter and is also required to grow at most by 0.9% this current year.

Inflation quickened to.3% year-on-year in June from 6.1% in May, data from Statistics Africa showed. Economists polled by Reuters had expected a 6.2% increase.

Analysts, who expect the central bank and keep its repo rate on hold at 7% on Thursday, said the latest inflation print could not change that view.

“I don’t think it’s planning to have impact in anyway. We thought right now inflation would possibly be near 7%,” Eskom chief economist Mandla Maleka said.

“We are able to settle for 6.3,” he was quoted saying, predicting a rate hike only in November.

The rand edged up slightly against the dollar after Wednesday’s data, suggesting some traders believed there is a somewhat higher probability of a rate hike recently.

Statistics South Africa said prices were up 0.6% over a month-on-month basis in June, after the 0.2% boost in the earlier month.

Core inflation, which excludes the costs of food, non-alcoholic beverages, petrol and energy, rose slightly in order to 5.6% year-on-year in June from 5.5%, and then to 0.4% month-on-month from 0.2%.

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