Inflation targeting is likely to be reviewed, because if South Africa's policymakers only use interest rates as the tool to fight inflation, the country is in for a nasty generational learning experience as the policy will not be removing the cause of inflation, said Chris Hart, chief economist from Investment Solutions.
Chief economist of Citigroup in South Africa Jean Mercier says he expects a South African growth rate of 4% in 2008, but adds that it should start stabilising towards the second half of the year and then have a bit of a pick-up in 2009. He foresees growth of 4,5% in 2009, with it picking up towards the soccer World Cup in 2010.
Despite a significant dip in real retail sales in South Africa, analysts feel that risks remain for another rate hike on January 31. However, the central bank may also have to ponder that real retail sales could head into negative territory in the months ahead and lead consumers into a recession.
The increase in South Africa's CPIX (consumer inflation less mortgage costs) for metro and other areas, which is used by the South African Reserve Bank for its inflation target, was up 6,7% year-on-year (y/y) in September from 6,3% y/y in August, Statistics South Africa (Stats SA) said on Wednesday.