‘Hard for SARB to cut rate’

2013-01-24 00:00

WHILE the cost of living in Pietermaritzburg, Durban and South Africa continued its mild upward trend in December 2012, the latest Consumer Price Index (CPI) is unlikely to influence a change in the interest rate.

Statistics South Africa said yesterday the CPI in December came in at 5,7% from 5,6% in November on the back of higher costs associated with housing and utilities, transport and food.

The monetary policy committee (MPC) of the SA Reserve Bank (SARB) will announce its interest rate decision today.

CPI in Pietermaritzburg in December came in at six percent compared with 5,8% in November.

The CPI in KwaZulu-Natal was 5,6% last month, down from 5,9% in November, and 5,5% in Durban, up from 5,3% in the previous month.

Statistics SA said the official average annual inflation rate in 2012 was 5,6%, which is within the MPC’s target rate of three to six percent.

Food and non-alcoholic beverages CPI in December remained above the overall CPI at 6,9%.

Food and non-alcoholic beverages CPI in Pietermaritzburg was 7,3%, in Durban seven percent and in KZN 6,9%.

CPI for administered prices in South Africa came in at 8,8% last month.

Administered prices are for goods and services provided by entities owned by the government, like electricity tariffs.

Economists said that although there were several risks to the inflation and interest rate outlook, the interest rate was expected to remain stable in the months ahead.

Nedbank economist Johannes Khosa said the depreciation of the rand could push consumer inflation higher in the months ahead.

“The upward pressure will partly be contained by subdued domestic spending.

“As a result, we expect CPI to remain within Reserve Bank’s target range in the short term,” said Khosa.

Standard Bank economist Shireen Darmalingam said higher food and fuel prices could weigh heavily on the inflation outlook.

“The December CPI print reinforces our case for the SARB to maintain its current monetary policy,” she added.

“A deteriorating inflation outlook and risks from recent currency weakness would make it difficult for the SARB to cut rates at the conclusion of the MPC meeting,” said Darmalingam.


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