Business

Inflation slows to 6.1% but interest hike still looms

Staff Reporter

Consumer price inflation slowed to 6.1% in February, but "generalised" inflation pressures mean interest rates may still rise sooner than expected.

Consumer price inflation (CPI) in February was 6.1% year-on-year, Statistics South Africa said on Thursday.

“The official inflation rate was 6.1% at February 2012,” the agency reported.

This rate was 0.2 of a percentage point lower than the corresponding annual rate of 6.3% in January 2012.

From January 2012 to February 2012, CPI increased by 0.6%.

In November, the South African Reserve Bank (SARB) said it expected its inflation target of between 3% and 6% to be breached in the final quarter of 2011.

It predicted that inflation would peak at around 6.3% in the first quarter of 2012, before declining gradually to within the target range in the final quarter of 2012.

It would reach a level of 5.2% in the final quarter of 2013.

The bank has kept interest rates unchanged at 30-year lows of 5.5%, after a cumulative 650 basis point reduction in the two years to November 2010.

The bank is due to announce its latest interest rate decision next Thursday.

Last week, Reserve Bank governor Gill Marcus said inflation pressures were becoming more “generalised”, suggesting interest rates could rise sooner than previously expected.

“[T]he most recent data seem to suggest that inflation is becoming more generalised, and may reflect the emergence of demand pressures.

“This is something that the bank will monitor very carefully,” she told the Volkswagen South Africa dinner in Johannesburg.—Sapa

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