The South African Reserve Bank’s (SARB) monetary policy committee (MPC) started at 9am on Wednesday, with a decision on interest rates expected at 3pm on Thursday.
The unanimous forecast of economists is that this will be the third consecutive MPC meeting where no change in interest rates is announced.
Last year the SARB cut interest rates five times by 550 basis points in total.
The no-change forecast is despite a steady CPIX inflation (headline inflation excluding mortgage costs) at 4,4% year-on-year (y/y) for metro and other areas in April and March from 4,8% y/y in February 2004. The CPIX has been below the midpoint of the inflation target range for six out of the past seven releases.
The SARB’s inflation target is to keep the y/y rate for CPIX within a range of 3% to 6% and most economists still expect CPIX to stay within range this year, but there is increasing uncertainty about official economic data and fuel-price policy.
The retail petrol price in South Africa has risen by 30,7% from June 2003, but the Department of Minerals and Energy capped the June increase at 30 cents a litre, instead of the free-market 38 cents a litre rise. So far the department has not informed the public about what the fuel price policy is after June.
Statistics South Africa is in the process of re-benchmarking and improving its coverage of economic data.
So far it has said that using the new business frame as opposed to the old business address register has resulted in nominal manufacturing, wholesale and motor trade retail sales being underestimated by 17%, while retail trade sales were underestimated by 20%.
The SARB has said nothing as to how it will match the consumption data that it compiles with the new improved production data compiled by Statistics South Africa. — I-Net Bridge