In April, inflation broke out of the 3% to 6% bracket set by the bank for 2007 and has stubbornly refused to retreat. This is despite the bank's Monetary Policy Committee (MPC) having raised the interest rate by half a percent to 9.5% in June.
With the committee due to meet in mid-August, Tito Mboweni, head of the reserve, suggested another rate increase was on the cards.
"I don't know what the members of the MPC are going to decide next week, but I think it is more likely that they are not going to cut interest rates, and more likely they might increase," he said on August 7 while addressing a business breakfast in East London.
Mboweni's warning came just a day after Finance Minister Trevor Manuel released results of the IMF report on the South African economy. While generally positive, citing robust growth, a steady decline in public debt and a budgetary surplus, the IMF warned that the reserve bank may have to raise interest rates to curb inflation.
The report said that the sharp rise in domestic demand, combined with capacity restrictions, could result in a widening of the current account deficit and a further increase in inflation.
The IMF said that while South Africa's economy is now less vulnerable to external shocks, the country's current account deficit, which stood at around 7% of GDP at the end of the first quarter, is a weak link in the economy and one that could fuel inflation.
Any major reversal of the flow of capital into the domestic equity market could weaken the local currency, bringing additional inflationary pressure.
Manuel played down concerns over inflation, saying that the upward trend was a global phenomenon mainly being driven by high oil and food prices. He said he disagreed with an IMF recommendation made last year that South Africa set a firm 4.5% target for inflation.
"If you take that and target inflation at a point rather than a range, you can snuff out all growth," the minister said. "We [..] disagree with the IMF on that point. It hasn't come back as strongly this year - but we would still hold to a range."
The treasury ministry issued a statement on August 6, saying that while it agreed with the IMF that the supply-demand imbalance was pushing up inflation, the cost of food and fuel were the main contributors to inflationary pressure and were only short-term problems.
"These should start to abate over the next year, lowering the contribution of food and energy price inflation to overall inflation," the statement said.
Stan du Plessis, an economist at Stellenbosch University, also disagreed with the IMF's assessment, suggesting it was short sighted.
Du Plessis told a meeting of the parliament's finance committee early this week that South Africa's policy of targeting inflation, rather than dealing with already published numbers, was forward looking. He said the views of the IMF distracted attention from the real policy issues, he said.
"The inflation rate which breaches or does not breach the inflation targeting system is the forecasted inflation rate at the appropriate horizon - in South Africa's case a horizon of about two years," said du Plessis.
During his East London address, Mboweni returned to two themes he has raised in the past: the high levels of household debt and the poor export returns for South Africa's manufacturing industry, saying both contributed to inflation.
While manufacturing contributed 16.4% of the country's GDP, it only represented 33% of South Africa's exports. This stacked up badly against the mining sector, which accounted for 55% of export earnings, despite only contributing 6% to GDP, he said.
"We are still relying predominantly on mining for exports, meaning that the export of manufacturing is lousy," said Mboweni. "That would explain quite clearly why we still have such a large current account deficit."
Previous rate rises have done little to take the heat out of South Africa's consumer binge or help close the trade gap. However, their supporters say that these measures take time. As du Plessis put it, South Africa's inflation policies have been put in place for the long haul, not a quick fix.