CPI lower than expected

2011-05-18 00:00

EXPERTS believe the first interest rate hike in the current cycle will take place only in early 2012, judging by the latest consumer price index (CPI), which came in lower than market expectations yesterday.

The April CPI was 4,2%, down from 4,1% in March, driven largely by inflation in the housing and utilities, food and non-alcoholic beverages, transport, and services sectors.

The CPI in Pietermaritzburg rose to 5,3% in April from 4,6% in March and 4,7% in February. KZN’s CPI in April was 3,6% from 3,4% in March and 2,9% in February.

Durban’s CPI came in at 3,2% last month compared with 2,8% the previous month and 2,6% in February.

CPI for food and non-alcoholic beverages in Pietermaritzburg was 5,9% in April from 5,1% in March, while that for food and non-alcoholic beverages in KZN was virtually unchanged at 4,8% in April from 4,9% in March. CPI for food and non-alcoholic beverages in Durban was five percent last month from 4,5% in March.

The target range of the SA Reserve Bank’s monetary policy committee (MPC) is three to six percent.

Statistics SA said the national CPI for administered prices remained stubborn in April at 10,7% from 10,9% the previous month. Administered prices are of goods and services provided by entities owned by the government, such as electricity.

Said Standard Bank economist Nomvuyo Gama, “Despite an MPC statement last week that was widely interpreted as being hawkish, our view on interest rates remains unchanged. The MPC in fact highlighted many of the factors that inform our view — the relatively tepid economic recovery, including stubbornly high unemployment and high household debt levels, and downside risks to the economic outlook will continue to weigh against interest rate increases — until evidence of second-round effects become apparent in the data, particularly the core inflation rate …”

Nedbank’s group economic unit expects food and fuel price inflation to push the CPI to the six percent mark later this year.

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