In the second half of 2005, economic activity gradually strengthened and HICP inflation rates rose to levels significantly above 2%, peaking at 2.6% in September, mainly as a result of rising energy prices. In addition, it became increasingly apparent that the upward shift in oil prices would be protracted.
These include rising crude oil prices and their impact on global growth and inflation, including the possibility that secondary inflationary pressures may be stimulated; the recent acceleration in domestic producer price inflation; the recent movements in the rand exchange rate; and the possibility of rising domestic capacity constraints.