Inflation still posing a risk

JOHANNESBURG – Higher interest rates do not always deal with inflation, but South Africa’s present regime had ensured price stability, deputy Finance Minister Jabu Moleketi said on Thursday.

“It is not at all times where increases in interest rates deal with the issues of inflation and if people are debating that then I think it’s a justifiable debate,” he told SABC television. “We have a regime that ensures price stability, it has worked for us.We might disagree with individual events in the actions of the Reserve Bank but we must never ever throw out the baby with the bath water.”South Africa’s Reserve Bank has raised interest rates by 300 basis points since June last year to head off mounting inflationary pressures.The CPIX inflation measure monitored by the bank for monetary policy has breached its three – six per cent target range for four consecutive months.But some analysts have questioned the need to increase interest rates to hem in inflation, arguing that it compounds consumer prices.Labour Minister Membathisi Mdladlana added his voice to such criticism on Wednesday and said cabinet should discuss the issue.SABC said Moleketi welcomed the debate but would not say whether the government is considering the question or not.Nampa-Reuters”We have a regime that ensures price stability, it has worked for us.We might disagree with individual events in the actions of the Reserve Bank but we must never ever throw out the baby with the bath water.”South Africa’s Reserve Bank has raised interest rates by 300 basis points since June last year to head off mounting inflationary pressures.The CPIX inflation measure monitored by the bank for monetary policy has breached its three – six per cent target range for four consecutive months.But some analysts have questioned the need to increase interest rates to hem in inflation, arguing that it compounds consumer prices.Labour Minister Membathisi Mdladlana added his voice to such criticism on Wednesday and said cabinet should discuss the issue.SABC said Moleketi welcomed the debate but would not say whether the government is considering the question or not.Nampa-Reuters