SA rate cut unlikely, despite CPI

JOHANNESBURG – Although consumer price inflation (CPI) fell back into the South African Reserve Bank’s target range of three to six per cent in October, it is unlikely to persuade the monetary policy committee to lower interest rates.

According to Statistics SA, CPI eased slightly to 5,9 per cent year-on-year in October from 6,1 per cent year-on-year in September.CPI has not fallen within SARB’s target range since April 2007.’While CPI inflation has regained target, it is unlikely to consistently remain within the three to six per cent band over the next six months due to base effects and the impact of salary and wage increases, which are still running well above six per cent,’ Investec group economist Annabel Bishop said.’It should rise just above six per cent in the next couple of months, but consistently regain target toward the middle of 2010, providing electricity tariffs are not hiked by more than 30 per cent in nominal terms.’The Efficient Group’s Freddie Mitchell concurred. ‘At 5,9 per cent we are in the inflation band, so that’s good news. But just how long we are going to stay there is dependent on electricity hikes next year and also when consumer demand starts returning to the market, what effects that will have on consumer prices in the future,’ he said according to I-Net Bridge. ‘But it’s good news for now.’ – Nampa-Sapa