Chance of 2011 rate cut fades

2010-12-15 00:00

THE Consumer Price Index (CPI) in November strengthened mildly on the back of higher food and petrol prices, but remained well within the three-to-six percent range of the Reserve Bank’s Monetary Policy Committee, at 3,6% from 3,4% in October.

Economists said the figure, which is in line with market expectations, does little to increase the chance of an interest rate cut early next year.

Consumer inflation in Pietermaritzburg was marginally up at 4,2% from 3,9% in October and four percent in September .

CPI in Durban was 2,4% from 2,3% in October, while KZN’s CPI was 2,9% in November from 2,6% in October.

Food inflation in Pietermaritzburg and Durban remained subdued in November.

CPI for administered prices — at 8,9% — remains well above the target range. The figure accelerated last month from 8,4% in October.

Standard Bank economist Tebogo Mosepele said the rise in food prices is mainly as a result of higher prices of fruits, oil and fats.

“The rise in food inflation reinforces our concerns that higher food prices could put upside risks on overall inflation as food accounts for 14,3% of the total CPI basket,” he added.

It appears many consumers are still reluctant to purchase bigger-ticket items.

Nedbank economist Carmen Altenkirch said, “The price of durable goods continued to decline on an annual basis, falling by 2,2%, due to declining furniture, appliances and car prices. Semi-durable goods prices were unchanged over the year, due to only moderate inflation for personal care items as well as clothing and footwear. In contrast, non-durable goods inflation picked up slightly to 4,3% from 3,9%.”

Altenkirch said the inflation outlook remains benign, particularly in light of the rand’s continued strength and the tentative economic recovery.

The University of Stellenbosch’s Bureau for Economic Research Inflation Expectations Survey for the fourth quarter of 2010 finds that most key economic participants expect inflation to remain subdued in 2011 and 2012.

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