The two-day meeting of the South African Reserve Bank’s (SARB) monetary policy committee (MPC) started as scheduled at 9am in Pretoria on Wednesday. The consensus view is that there will be no change in rates due to surging oil prices.
In particular, none of the economists at South Africa’s four largest commercial banks expects any change. They say the possibility of a rate hike is very remote.
The no-change forecast is despite a drop in CPIX inflation (headline inflation excluding mortgage costs) to 3,7% year-on-year (y/y) in August from 4,2% y/y in July and 5% y/y June after staying at 4,4% y/y for metro and other areas in May, April and March from 4,8% y/y in February 2004.
The CPIX has been below the mid-point of the inflation target range for six out of the past seven releases prior to June.
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.
Crude oil prices were below $53 per barrel in Asian trade on Wednesday, coming sharply off the record highs seen on Tuesday on concerns about possible disruptions to supply.
At 3.45am GMT, the benchmark light sweet crude contract for delivery in November was at $52,27.
The contract hit an unprecedented $54,45 on Tuesday against a backdrop of strikes in key producers Nigeria and Norway, before sliding as investors locked in fat profits.
A survey by I-Net Bridge among economists on Tuesday showed that the current record high crude oil prices are unsustainable, but a return to last year’s Opec basket of seven crude oils’ average of $28,10 per barrel is also unlikely, mainly because of the depreciation of the dollar against other currencies.
Opec’s basket price has been above its preferred target band of $22 to $28 per barrel since December 2 2003 and has averaged $35 so far this year.
The MPC meeting began on Wednesday morning and ends on Thursday afternoon, as specialist presentations outline both the domestic and international environments.
These presentations will be repeated to the media and then at 3pm on Thursday, SARB Governor Tito Mboweni will read out the MPC statement live on television. — I-Net Bridge