OWN CORRESPONDENT, Johannesburg | Tuesday 3.00pm
CONSUMER prices rose by more than expected in January, prompting a small sell-off in the government bond market and weakness in the rand.
The consumer price index rose by 2,6% year-on-year in the first month of 2000, from 2,2% in December, against a consensus forecast for a 2,3% climb, figures released by the official government statistical service showed.
Core inflation, which strips out the volatile costs of mortgage rates, some food items and value added tax, rose by 8,1% for the year, compared with 7,9% in December and a forecast 7,8% increase.
”The core number is disappointing because it came from a high base. It’s a bit of a shocker,” said James Rheeder at S&P’s MMS service in Johannesburg. ”We won’t be getting any interest rate cuts this year.”
Yields on the government’s benchmark five-year bond, the R150, rose to 13,02% on the news, from 12,96% earlier, before recovering to last stand just below 13%. The rand, which has been volatile in recent weeks in the face of sustained dollar strength, was trading at R6,36 to the dollar from R6,34 earlier.
Statistics South Africa also included a new calculation in January’s data, a figure for CPI excluding the cost of interest rates on mortgage bonds. The measure, known as CPI-ex, is expected to be the one the central bank is charged with matching when inflation targets are introduced by the finance minister, probably in the budget which will be announced on February 23.
CPI-ex rose to an annualised 7,7% in January, from 7,5% in December. Economists reckon the finance minister will probably task the Reserve Bank with hitting and sticking to a CPI-ex band of 3-5% within 18 months to two years. — Reuters