South Africa rate hike likely after retail sales, inflation edge higher

South Africa's retail sales grew more than expected while consumer inflation also accelerated, official data showed on Wednesday, making an interest rate hike very likely next week despite weak overall economic growth.
The South African Reserve Bank raised its benchmark lending rate by 50 basis points last year, and some analysts expect another increase on Jan. 28, as a sharply weaker rand and rising food prices due to drought, fuel inflation.
Retail sales rose by 3.9 percent year-on-year in November after expanding by a revised 3.4 percent in October, Statistics South Africa said.
This was above the 2.9 percent increase predicted by economists in a Reuters poll.
Earlier, data from the statistics agency showed that inflation climbed to 5.2 percent in December from 4.8 percent the previous month, nudging towards the top end of the central bank's 3-6 percent target range.
The rand was on the back foot against the dollar on Wednesday, reflecting investors' concerns about the outlook for Africa's most advanced economy, which has struggled to grow due to structural constraints including chronic power shortages.
The central bank has singled out the local currency, which fell about 25 percent against the dollar last year, as one of the biggest risks to inflation.
Food prices are also expected to spiral as a drought ravaging the southern Africa region cuts domestic grain output.
"In an environment with a rapidly deteriorating inflation outlook, the Reserve Bank will have little choice but to raise rates to contain inflationary expectations," analysts at Nedbank said in a note.