‘Oil prices still a risk’

JOHANNESBURG – Sustained lower international oil prices will help to contain inflation in South Africa, but this should not be taken for granted, central bank governor Tito Mboweni said yesterday.

“If sustained, the recent decline in oil prices augurs well for inflationary developments going forward,” he said in a speech posted on the Reserve Bank’s website. But risks to the inflation outlook remained as crude oil prices were volatile, Mboweni said in a speech prepared for delivery at a breakfast meeting in Durban.Crude oil prices have fallen about 25 per cent since peaking in July this year, slipping below US$60 per barrel early last month and prompting a production cut by Opec.Crude has traded in a range of US$56,55-US$61,79 for the past month.Sharp falls in South African petrol pump prices over the past three months are expected to temper rising consumer price inflation which has been edging towards the upper end of the central bank’s three-six target range.The declines – totalling around 15 per cent over the three-month period – reverse a key threat to inflation and should help to counter rising food prices and robust consumer demand.Mboweni has forecast the targeted CPIX inflation measure to push towards six per cent and remain near that level until the second half of 2007, while the National Treasury has warned it could pierce the upper end of the target range early next year.CPIX inflation – which excludes mortgage costs – ticked up to 5,1 per cent in September, while factory gate prices, which tend to lead consumer prices by a few months, moderated to nine per cent in the same month.Nampa-ReutersBut risks to the inflation outlook remained as crude oil prices were volatile, Mboweni said in a speech prepared for delivery at a breakfast meeting in Durban.Crude oil prices have fallen about 25 per cent since peaking in July this year, slipping below US$60 per barrel early last month and prompting a production cut by Opec.Crude has traded in a range of US$56,55-US$61,79 for the past month.Sharp falls in South African petrol pump prices over the past three months are expected to temper rising consumer price inflation which has been edging towards the upper end of the central bank’s three-six target range.The declines – totalling around 15 per cent over the three-month period – reverse a key threat to inflation and should help to counter rising food prices and robust consumer demand.Mboweni has forecast the targeted CPIX inflation measure to push towards six per cent and remain near that level until the second half of 2007, while the National Treasury has warned it could pierce the upper end of the target range early next year.CPIX inflation – which excludes mortgage costs – ticked up to 5,1 per cent in September, while factory gate prices, which tend to lead consumer prices by a few months, moderated to nine per cent in the same month.Nampa-Reuters