Inflation expected to speed up by the end of the year

Inflation will more than likely head out of the South African Reserve Bank’s target band of 3-6% by the end of 2011, economists told the Mail & Guardian on Wednesday.

Figures released by Stats SA indicated South Africa’s consumer price index to be 5.3% in August — unchanged year-on-year.

There was however a slight increase of 0.2% month on month for the same period.

The stagnancy in inflation surprised economists, who predicted CPI would rise marginally to 5.5%.

“This still doesn’t change the prediction that inflation will rise and break out of the target band by December and stay out of the target range until midway through 2012,” Absa Capital senior economist Gina Schoeman told the M&G.

The Reserve Bank adopted a formal inflation-targeting policy framework in 2000, in the hopes of controlling inflation levels.

This will be the first time the CPI headline marker moved out of the target range since January 2010 when it was recorded at 5.2%.

Since then CPI has yo-yo’d within the target range, slipping to a low of 3.2% in September 2010.

This all translates into possible pressure being placed on South Africa’s consumers as it will eat into their value of their income spending power.

But for the moment it would seem the Reserve Bank will resist moving on interest rates despite any potential inflation pressures.


“Regardless of a possible move out of the target band, we see a lot of tolerance from the Bank when it comes to inflation, as consumer spend for now remains sustained,” Schoeman added.

This view is reinforced by a senior economist at Standard Bank,Shireen Darmalingam, who believes inflation will move upwards but it won’t affect rates immediately.

“Increases in the cost of petrol will weigh in on consumers for moment, but if anything we would predict a rate cut due to the deterioration of domestic growth. This wouldn’t happen immediately though, perhaps in December,” Darmalingam said.

Stats SA reported second-quarter gross domestic product in August to be 1.3%, lower than the expected 1.6 %, following first-quarter growth of 4.5%.

These views come a day prior to the end of the Reserve Bank’s recent Monetary Policy Committee meeting.

An announcement on any change to policy, particularly regarding interest rates will be made on Thursday afternoon in Pretoria.

It is widely expected rates will remain unchanged at 5.5% — the lowest they have been in 30 years.

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever. But it comes at a cost. Advertisers are cancelling campaigns, and our live events have come to an abrupt halt. Our income has been slashed.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years. We’ve survived thanks to the support of our readers, we will need you to help us get through this.

To help us ensure another 35 future years of fiercely independent journalism, please subscribe.

Advertising

The recovered remain cautious

People who have survived Covid-19 are not going through life carefree. They are still taking all the preventative measures

Lockdown relief scheme payouts to employees tops R14-billion

Now employers and employees can apply to the Unemployment Insurance Fund for relief scheme payments
Advertising

Press Releases

Covid-19 and Frontline Workers

Who is caring for the healthcare workers? 'Working together is how we are going to get through this. It’s not just a marathon, it’s a relay'.

PPS webinar Part 2: Small business, big risk

The risks that businesses face and how they can be dealt with are something all business owners should be well acquainted with

Call for applications for the position of GCRO executive director

The Gauteng City-Region Observatory is seeking to appoint a high-calibre researcher and manager to be the executive director and to lead it

DriveRisk stays safe with high-tech thermal camera solution

Itec Evolve installed the screening device within a few days to help the driver behaviour company become compliant with health and safety regulations

Senwes launches Agri Value Chain Food Umbrella

South African farmers can now help to feed the needy by donating part of their bumper maize crop to delivery number 418668

Ethics and internal financial controls add value to the public sector

National treasury is rolling out accounting technician training programmes to upskill those who work in its finance units in public sector accounting principles

Lessons from South Korea for Africa’s development

'Leaders can push people through, through their vision and inspiration, based on their exemplary actions'

Old Mutual announces digital AGM

An ambitious plan to create Africa’s biggest digital classroom is intended to address one of the continent’s biggest challenges — access to education

The best local and international journalism

handpicked and in your inbox every weekday