Interest rate cut unlikely

2012-08-23 00:00

IT IS unlikely that the lower-than-expected consumer inflation data will prompt a further interest rate cut when the South African Reserve Bank’s (SARB) monetary policy committee (MPC) meets next month.

Statistics South Africa said yesterday that the Consumer Price Index (CPI) for July 2012 declined to 4,9%, on the back of a moderation in the growth of the prices of housing and utilities, food and transport.

The CPI for June 2012 was 5,5%.

The CPI in KZN declined to 5,3% last month from 5,8% in June 2012, 6,2% in May and 6,6% in April.

The CPI in Pietermaritzburg was lower at 5,4% in July 2012 compared with six percent in June 2012.

The CPI in Durban and Pinetown came in at 4,9% last month compared with 5,6% in June 2012.

One of the positive elements of the latest CPI was the moderation in administered prices — which came in at 7,5% in July 2012.

CPI for administered prices reached double digits in 2011. In contrast, administered prices in June 2012 came in at 10,1%. Administered prices are those goods and services provided by entities owned by the government, like electricity tariffs.

Nedbank economist Busisiwe Radebe said electricity price pressures had moderated somewhat.

“The lower monthly increase is probably as a result of Nersa’s [National Energy Regulator of South Africa] reduced tariff increases that municipalities had to take into account. Other downward surprises were in the food and insurance categories. Food remained unchanged on a monthly basis and insurance was slightly down,” Radebe said.

Although consumer inflation is now well below the MPC’s target range of three to six percent, economists expressed concern that inflation could be driven higher on the back of higher food prices in the near future. The MPC cut the repo rate to five percent.

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