Mboweni repeats inflation warning

JOHANNESBURG – South Africa’s central bank governor Tito Mboweni has repeated a warning that the growing impact of high global oil prices will not be allowed to develop into an inflationary spiral.

Last week the governor warned clearly that the next movement in interest rates was likely to be upwards, saying that monetary policy might have to be tightened and that it must not “fall behind” the inflation curve as it did a few years ago. “As noted before, the immediate or first-round effects of rising energy prices would have to be accepted; however, monetary policy will not allow this to develop into an inflationary spiral,” he said in a speech posted on the central bank’s website yesterday.Mboweni was due to have made the remarks to a bond market awards ceremony in Johannesburg late on Tuesday.In his prepared speech, he repeated that the annual increase in the targeted CPIX inflation rate was expected to stay inside its three to six per cent official range over the next couple of years, peaking just below the upper end in the first half of 2006.Mboweni said the exchange rate of the rand was also an important factor affecting inflation, and that had remained relatively stable since the start of 2005, although its nominal exchange rate had depreciated by six per cent over that period.-Nampa-Reuters”As noted before, the immediate or first-round effects of rising energy prices would have to be accepted; however, monetary policy will not allow this to develop into an inflationary spiral,” he said in a speech posted on the central bank’s website yesterday.Mboweni was due to have made the remarks to a bond market awards ceremony in Johannesburg late on Tuesday.In his prepared speech, he repeated that the annual increase in the targeted CPIX inflation rate was expected to stay inside its three to six per cent official range over the next couple of years, peaking just below the upper end in the first half of 2006.Mboweni said the exchange rate of the rand was also an important factor affecting inflation, and that had remained relatively stable since the start of 2005, although its nominal exchange rate had depreciated by six per cent over that period.-Nampa-Reuters