Mboweni upbeat on inflation

JOHANNESBURG – South Africa’s central bank governor, Tito Mboweni, said on Monday several factors had changed since the Reserve Bank held its last monetary policy (MPC) meeting, when it warned that the inflation outlook had worsened.

“Things have changed since the last MPC meeting,” he told journalists at a year-end media function. Mboweni listed strength in the rand, lower global oil prices, an unexpected slow-down in consumer and producer price inflation and improved domestic inflation expectations as factors that had changed the picture since the last policy meeting in October.The central bank is holding its two-day policy meeting today and tomorrow.A Reuters poll on Friday showed all 18 economists questioned believed the Reserve Bank would keep its key repo rate steady at 7,0% when the meeting ends.Mboweni listed nine factors that had changed substantially since the last policy meeting, including global inflation not rising as much as thought and stability in unit labour costs, which had been cited as a concern before.”The exchange rate of the rand has strengthened somewhat, thereby ensuring a cushion against imported inflation – good news, not what we thought last time,” he said.”GDP growth after revisions shows the economy is growing nicely, and needs no monetary or fiscal accommodation,” he said.But Mboweni said some challenges lay ahead as the country’s trade deficit was widening, which meant that the current account deficit would be larger.”That has consequences,” he said without elaborating.But he added that the overall balance of payments “still looks good.”Mboweni’s comments struck a different tone from his remarks following the last MPC meeting in October, when he warned the next move in interest rates was likely to be upward and could be imminent.More economists now believe that interest rates will be kept unchanged for at least a year longer as the central bank seeks to aid government efforts to boost growth without jeopardising inflation.- Nampa-ReutersMboweni listed strength in the rand, lower global oil prices, an unexpected slow-down in consumer and producer price inflation and improved domestic inflation expectations as factors that had changed the picture since the last policy meeting in October.The central bank is holding its two-day policy meeting today and tomorrow.A Reuters poll on Friday showed all 18 economists questioned believed the Reserve Bank would keep its key repo rate steady at 7,0% when the meeting ends.Mboweni listed nine factors that had changed substantially since the last policy meeting, including global inflation not rising as much as thought and stability in unit labour costs, which had been cited as a concern before.”The exchange rate of the rand has strengthened somewhat, thereby ensuring a cushion against imported inflation – good news, not what we thought last time,” he said.”GDP growth after revisions shows the economy is growing nicely, and needs no monetary or fiscal accommodation,” he said.But Mboweni said some challenges lay ahead as the country’s trade deficit was widening, which meant that the current account deficit would be larger.”That has consequences,” he said without elaborating.But he added that the overall balance of payments “still looks good.”Mboweni’s comments struck a different tone from his remarks following the last MPC meeting in October, when he warned the next move in interest rates was likely to be upward and could be imminent.More economists now believe that interest rates will be kept unchanged for at least a year longer as the central bank seeks to aid government efforts to boost growth without jeopardising inflation.- Nampa-Reuters