South Africa’s consumer price index excluding mortgage rate changes (CPIX) for metro and other areas, which is used by the South African Reserve Bank for its inflation target, rose by 4% year-on-year in December after increasing by 3,7% in November, Statistics South Africa said on Wednesday.
The December CPIX was expected to rise to 3,8% year-on-year from November’s 3,7%, according to a survey of economists conducted by I-Net Bridge. Economists’ forecasts for CPIX ranged from 3,5% to 4%.
Dawie Roodt, chief economist at the Efficient Group, commented: “The numbers were spot-on with what we expected. We still have to analyse them, but I suspect that medical inflation, food and transport costs were probably the three major contributors on a year-on-year basis. This doesn’t change our rate view — we are still expecting a cut in April.
Said Mike Schussler, economist at T-Sec: “The numbers are a bit higher than we expected, but I don’t think it is a train smash. This will not be good for the bond market, but probably will be neutral for equities, but I think the chances of an interest rate cut are still on.”
Elna Moolman, economist at Standard Bank, said: “The figure is higher that what we’d expected. In terms of the outlook, the inflation remains target-friendly and we expect no cut at next week’s MPC [monetary policy committee] meeting.
“Today’s data will also give more support to our view that there shouldn’t be a cut in repo rates at the moment. We aren’t concerned by high oil prices as their negative impact would be countered by a strong rand.”
Annabel Bishop, economist at Investec, commented: “Food prices rose on the month, probably due to adverse weather conditions. The 30c/litre petrol-price cut provided some cushioning, but a petrol-price hike is now on the cards for February. The outcome was higher than expected, but we still believe interest rates will remain unchanged in 2006.
“The CPIX number was slightly worse than expected,” said Colen Garrow, economist at Brait, “but it remains below the mid-point of the central bank’s target range. Inflation pressures remain benign and should not have any impact on next week’s monetary policy committee meeting, where I expect members to keep rates steady.”
According to Kevin Lings, Stanlib Asset Management economist: “CPIX was for the first time in a while higher than expected. The latest CPIX figure would have been marginally negative for interest rates. We expect interest rates to remain unchanged through 2006. Food inflation, which has been creeping up, represents a risk for CPIX given its big weighing in CPIX.” — I-Net Bridge