South African economists have reacted to South Africa’s consumer price index excluding mortgage rate changes (CPIX) for February.
CPIX was up 3,1% year-on-year (y/y) for metro and other areas in February — the lowest CPIX to date — compared with 3,6% y/y in January, Statistics South Africa said on Wednesday.
The CPIX was expected to ease to a 3,3% y/y increase in February from 3,6% y/y in January and December’s 4,3% y/y, according to a survey of economists conducted by I-Net Bridge.
Annabel Bishop, economist at Investec, said: “Whilst February’s CPIX inflation rate came out at the bottom of the inflation target range, this is expected to be the low point as petrol price hikes, indirect tax increases and rand weakness cause it to rise back above 4% this year.
“We still expect that the inflation target will be consistently achieved in 2006 and, consequently, that interest rates will remain on hold this year.”
Colen Garrow, economist at Brait, commented: “The figure is pretty much as expected, but the main concern is on the outlook for the next few months. The trend seems to be higher at the moment and I don’t think this figure justifies an interest-rate cut at all.”
According to Nico Kelder, economist at Efficient Group, the number is “very low”.
“The [South African] Reserve Bank is very close to the bottom of it target range. But with the oil price where it is and the currency weakening, we don’t expected the monetary policy committee to cut rates.
“We expect inflation to pick up in the coming months because of the sharp increases in the petrol price in March and April We only expect it to consider cutting rates if the oil price declines significantly while the rand remains fairly stable,” he said.
John Loos, economist at Absa Bank, said: “The February CPIX figure was slightly better than what I had expected, most probably due to the decline in the petrol price during February. However, inflation is likely to tick up in March and April due to the petrol price in March and April.
“I don’t see any change to the repo rate at the South African Reserve Bank’s April meeting. I see think there is room to cut interest rates, but only in the second half of the year.
“The Reserve Bank is waiting for a decline in local consumer spending, which I think will start coming through in the months ahead, a decline in the international oil price and a fall in the local petrol price.” — I-Net Bridge