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Send  Print  Share  RSS  Twitter  27 Jan 2010

Investec CPI Snapshot


Actual 6.3% y/y (0.3 m/m), expected 6.4% y/y, previous 5.8% y/y

CPI inflation left the target range in December, as expected, due to seasonal and statistical base effects. Januaryís outcome is expected at 6.4% y/y.

Todayís outcome does not change our view either in terms of the future path of interest rates or inflation. With the demand side of the economy and labour market still in recession and only likely to emerge from it in early 2010, there is little chance of any interest rate hikes before Q4.10. Even this monetary tightening at the end of next year will be heavily dependent on economic performance and may well be delayed until 2011. The move forecast in Q4.10 is based on the belief that monetary policy will be returned to a more neutral stance, should the strengthening economy warrant it. Electricity tariff increases of 35% will keep inflation CPI inflation out of target in 2011 from when the tariff hikes are instituted.

While the chance of a 50bp cut at the March MPC still remains, it seems that the SARB will keep a close focus on inflation, despite CPI inflation being largely structural (driven by administered prices) in nature.

Annabel Bishop

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