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28 Nov 2007 11:58
South Africa’s targeted CPIX inflation rate quickened to 7,3% in the year to October from 6,7% in September, data showed on Wednesday, above forecasts.
Statistics South Africa also said that the all-items consumer price index (CPI) increased by an annual rate of 7,9%, compared with 7,2% in September.
On a monthly basis, CPIX rose by 0,7% in October compared to 0,7% growth previously, and headline CPI increased by 0,9% month-on-month.
A Reuters poll had forecast CPIX would tick up to 7% year-on-year and predicted a rise of 0,4% month-on-month.
Ridle Markus, an economist at Absa said the figure was a lot worse than expected.
“We expected 7% for CPIX and this is not a good sign for interest rates in December.
“This will put further pressure on interest rates, with peak inflation now likely to be well above 8% in February 2008, although, I think the Reserve Bank would not want to kill the economy in 2008.”
Nico Kelder, an economist at Efficient Group said the figure was a “shocker”.
“A rate hike in December has been a given. These figures, as well as yesterday’s [Tuesday’s] data that the economy grew above 4,5%, and expected petrol price hikes in next month and in January, mean that another rate hike is a strong possibility at the MPC meeting in January next year.”
Colen Garrow, an economist at Brait, said: “CPIX is higher than the market was discounting. It’s an indication that inflation is rising for all the wrong reasons and it suggests that a rate hike is on the cards.
“CPI is also still very high. The figures are trending higher. The numbers confirm what markets have discounted. People must be vigilant; we are likely to see prime hit 14,5% next month. This prospect is damaging for economic growth.” - Reuters, I-Net Bridge
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