South Africa’s targeted CPIX inflation quickened to 6,3% in the year to April, breaching the central bank’s 3% to 6% target for the first time since August 2003.
Figures from Statistics South Africa also showed that the all-items consumer price index (CPI) increased by an annual rate of 7% in April, compared to 6,1% in March.
On a monthly basis, CPIX rose by 1,2% compared to 1% growth previously, while headline CPI increased by 1,3%.
A Reuters poll had predicted that CPIX would rise by 5,9% year-on-year and 0,9% month-on-month, while CPI was seen at 6,5% year-on-year and 0,8% month-on-month.
Mike Schussler, an economist at T-Sec, said the figure was a ”shocker” and that one interest rate hike would not be enough, ”it will have to be two”.
Tebogo Dintwe, an economist at JP Morgan, said: ”The number is much higher than expected and poses an inflation risk on the upside, the [South African Reserve] Bank will have to hike rates in June. But we still have money supply data tomorrow [Thursday].”
Annabel Bishop, an economist at Investec Group Economics said: ”Annual CPIX inflation rose significantly in April, chiefly on the back of a 68c/litre hike in the petrol price and rising food price inflation. We expect CPIX inflation is likely to miss the target at least seven more times in the next twelve months as today’s higher than expected figure has pushed up the outcome over this period. This supports our view that interest rates will be hiked by 50bp at the June 2007 MPC meeting, as second round effects from the current steady rise in CPIX inflation are also starting to emerge given recent wage demands of a 12% increase.”
George Glynos, a market analyst at ETM, said the figure was ”terrible”.
”Food was the surprising factor. This is obviously of concern for the Reserve Bank and tends to raise the probability of a rate hike significantly. CPIX is already above the Reserve Bank’s target ceiling of 6% and it’s likely to remain there for some months,” he said. – Reuters, I-Net Bridge