To enjoy the full Mail & Guardian online experience: please upgrade your browser
14 Sep 2007 07:49
South African inflation is expected to return to its target range in the second half of 2008, the country’s central bank said on Friday.
The South African Reserve Bank’s (SARB) forecast was more hawkish than previous predictions. After its August monetary policy meeting, it expected inflation to come back to the target band in the second quarter of 2008.
The SARB acknowledged that the main drivers of inflation, food and fuel, were mainly outside its direct influence, and said it had to be mindful of the impact of inflation staying outside the target band.
“However, the MPC [Monetary Policy Committee] is mindful of the impact of these developments on inflation expectations and also of the need to act against the emerging generalised inflation pressures,” it said in its 2006/07 annual report released on Friday.
“The most recent inflation forecasts of the bank suggest that inflation should return to within the inflation target range during the second half of next year, and monetary policy will continue to act to ensure that this outcome is achieved.”
The CPIX inflation rate, which the SARB uses for steering monetary policy, has stayed outside the Bank’s target band of 3% to 6% for four months, since breaching it in April.
The CPIX figure, which excludes mortgage costs, rose to an annual 6,5% in July, a four-year high.
SARB chief economist Monde Mnyande told reporters the July rate of increase was “not really expected”, adding inflation would likely peak in the first quarter of 2008.
The central bank’s policy committee has raised the repo rate by 300 basis points since June last year to 10%, including 50 basis point increases each in July and August this year.
Some analysts are projecting another increase in the key repo rate at the October 10 to 11 meeting.
Mnyande also said South Africa was not immune to recent global market turmoil but the bank had not seen any shifts in capital inflows.
“I don’t think we are immune to what is happening in international markets,” Mnyande said, adding for now capital inflows remained positive.
“We are not immune but at the same time we have to be concerned, and remain vigilant to monetary developments [in South Africa].”
Global market have been sharply volatile over the past month on fears of a world credit squeeze and a slowing United States economy, prompting major central banks to inject funds to ease liquidity and bring calm.
But so far capital inflows, needed to finance a current account deficit that stood at 6,5% of gross domestic product in the second quarter of 2007, have been maintained.
Create Account | Lost Your Password?