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South Africa's central bank will probably raise the benchmark interest rate today after inflation accelerated to the fastest pace in five years and bank officials said it will remain above target until 2010.

Policy makers may raise the repurchase rate by 1 percentage point to 12.5 percent, the biggest move since September 2002, according to 18 of 26 economists surveyed by Bloomberg. The rest expect a half-point increase. Governor Tito Mboweni will announce the decision in a televised speech at about 3 p.m. in Pretoria.

Surging oil and food prices are driving inflation above central bank targets worldwide and replacing the credit squeeze as their main concern. South Africa's Reserve Bank, which raised the key rate half a point at five of the past six meetings, targets a range of 3 percent to 6 percent and after price growth surged to 10.4 percent in April, Mboweni promised “drastic measures'' and two officials said the bank will miss its goal this year and next.

“Reserve Bank officials have become more bearish on the inflation outlook,'' said Adenaan Hardien, chief economist of African Harvest Fund Managers in Cape Town. “Price pressures have continued to broaden much more than we expected. Even with a 1 point increase, there's still a good chance they'll do more.''

Vietnam on June 9 raised its rate to the highest in Asia and a day later Chile's central bank raised the benchmark lending rate half a percentage point to help contain the fastest inflation since 1994. Brazil, the Philippines and Indonesia also lifted borrowing costs this month.

South African Pressures

In South Africa, gasoline costs have climbed to a record as crude oil trades above $130 a barrel and the rand's 13 percent decline against the dollar this year boost import costs. The bank is also concerned that a proposed 60 percent increase in electricity tariffs this year will keep the inflation rate outside the target.

Price pressures have spread beyond food and fuel, boosting wage demands get a free credit report. Oil and chemical workers said yesterday they may strike after pay talks broke down. Workers are demanding a 14 percent wage increase, while employers are offering 10.5 percent.

A survey tomorrow by the Bureau for Economic Research, based at the University of Stellenbosch, will probably show a deterioration in inflation expectations, Hardien said.

Inflation in April exceeded the target for a 13th consecutive month. That may undermine the credibility of monetary policy, Mboweni said on May 28, adding he may raise the benchmark interest rate by 2 percentage points.

The comment prompted economists from Lehman Brothers, Goldman Sachs Group Inc. and Standard Chartered Plc to predict a 1 percentage point rate increase this week, up from previous forecasts of 50 basis points.

Slowing Growth

The central bank may raise rates even after the economy grew at its slowest pace in more than six years in the first quarter. The government's 4 percent growth forecast for this year is “under pressure,'' Finance Minister Trevor Manuel said on June 5, as power outages, record oil prices and higher interest rates crimp production.

“Raising interest rates by 100 basis points is going to have a negative impact on the economy,'' said Russell Lamberti, an economist at Econometrix Treasury Management in Johannesburg. “Over the longer term, the Reserve Bank is more concerned that inflation is a bigger threat.''

The economy expanded an annualized 2.1 percent in the first quarter, from 5.3 percent in the previous three months, after gold and platinum mines, the biggest foreign currency earners, had to shut for five days in January because of an electricity shortage. Lamberti expects growth to average about 3 percent this year from 5.1 percent in 2007.

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