Moody’s Economy.com expects South Africa’s CPIX inflation to peak in the closing months of the year and to linger at the upper end of the central bank’s 3% to 6% target range going into 2007, before moderating steadily.
“Although the country’s borrowing rates are still quite low in historical terms, we expect higher interest to dampen the recent explosion in private sector credit growth and to take some steam out of consumer spending. Treasury commentary from Pretoria earlier this week highlighted just such an outcome,” Moody’s Economy.com said.
The recent slowdown in retail sales growth was flagged as a sign that monetary tightening is having its desired effect, it added.
It foresees consumer price inflation for October having accelerated for the sixth straight month, with CPIX rising some 5,2% year-to-year in response to rising food prices and a weaker rand.
“Meanwhile we are tipping factory gate price growth to decelerate for the second straight month as a result of easing global oil prices. Headline PPI growth should roll in around 8.8% on the year. The October pricing reports will cement expectations for another 50 basis point rate hike in December, taking the main repo rate to a heady 9%,” it said.
Both CPI and PPI data for October are due for release next week. – I-Net Bridge