South Africa’s producer price inflation (PPI) slowed to 9,3% year-on-year in December from November’s 10%, adding weight to the argument that interest rates may not rise much further.
On a monthly basis, PPI decelerated by 0,6% compared with a 0,5% expansion in November, Statistics South Africa said on Thursday.
Economists polled by Reuters had forecast annual PPI would go up by 10,3%.
”It’s a bit of an unexpected number. February could well be the last rate hike — I think that’s what the numbers are telling us from an inflation point of view,” said Brait economist Colen Garrow.
”These inflation numbers are too mild. I think the rand ought to strengthen. It should test the psychological dollar support of seven over the next month or so,” he added.
The rand weakened slightly to 7,13 just before the figures came out. Yields on the benchmark R157 bond maturing in 2015 were little changed at 7,795%.
South Africa’s central bank raised its key repo rate by 200 basis points to 9% in four stages last year, the initial increase in June being the first hike in the country’s commercial lending rates since September 2002.
Some analysts believe the South African Reserve Bank could announce a further half-percentage point hike in rates in February, while others think lower-than-expected consumer and producer inflation data for December 2006 have lessened that likelihood.
The targeted CPIX consumer inflation was steady at 5% in December, slightly below forecasts of a 5,1% increase, thanks to lower fuel costs and slower food inflation, figures from Stats SA showed on Wednesday.
South African Reserve Bank Governor Tito Mboweni recently said CPIX inflation could breach the upper end of a 3% to 6% target range in April before retreating. — Reuters