While CPIX inflation in South Africa may briefly exceed 6% in early 2007, it is projected to remain within the target band thereafter, South Africa’s Treasury said in its Medium-Term Budget Policy Statement on Wednesday.
The Treasury said CPIX is expected at 4,6% in 2006 from the 4,3% announced in February.
“Domestic and external price pressures are expected to lead to the inflation rate trending upwards during the remainder of 2006 and into early 2007, before decreasing again,” said Finance Minister Trevor Manuel.
The Treasury said CPIX inflation is expected to average 4,6% in the current year and to average 4,8% over the medium term.
“Domestic demand has been exceptionally strong in recent years, largely as a consequence of households adjusting consumption patterns to match changes in income and wealth levels,” said Manuel.
“This was brought about by improved economic fundamentals, including lower interest rates, increased access to credit, rising asset prices and increases in real wages,” he added.
“With this adjustment slowing somewhat, consumption is expected to grow at a more sustainable pace of 4% to 5% over the forecast period,” concluded Manuel.
The inflation target range for CPIX is between 3% and 6% year-on-year. — I-Net Bridge