Johannesburg | Tuesday
AN ABSA BANK economist on Monday predicted a one percent interest rate hike in June following the announcement that the CPIX inflation measure stood at eight percent last month.
”There is now an increasing risk of further hikes thereafter,” economist John Loos said in a statement.
He said the CPIX was slightly higher than market expectations.
Bonds were initially negatively affected by the release of the inflation figures, ”reflecting the fact that the market had not expected such poor figures”.
Loos said food and oil prices could not solely be blamed for the inflation rise. There had also been sharp increases in wages in the non-agricultural formal sector.
Wages rose by 8,9% year-on-year in the fourth quarter of 2001.
”Rising labour costs are therefore a key driver of domestic inflation,” Loos said.
”Thus, while imported inflationary pressures are significant, it would seem that domestic underlying inflationary pressures have also been increasing for some time. It would be inappropriate to blame all of the rising inflation on imported sources.”
It was expected that labour costs would be driven up further during this year’s wage bargaining period by increased inflationary expectations.
”The risk now is that consumer price inflation will exceed expectations. We predict a further 100 basis point interest rate hike in June,” Loos said.
”The data strengthens expectations of a sharper interest rate hike later in the year.”
Statistics SA earlier reported that the CPIX was 0,5% up last month from 7,5% in February.
The CPIX – the official inflation rate excluding mortgage bond rates – is used by the SA Reserve Bank to determine its inflation targets.
The headline inflation rate, or consumer price index (CPI), stood at 6,6% last month, compared to 6,1% in February.
The main contributors to the eight percent figure included annual increases in the price indices for food, housing, medical care, and transport.
The annual percentage change in food prices was 13% for the historical metropolitan areas last month, Stats SA said. This was up from 11,7% in February.
”The increase of 13,0% was mainly due to annual increases in the prices of meat; grain products; vegetables; and milk, cheese and eggs.” – Sapa