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CPI Marginally Down in December

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The Consumer Price Inflation in December fell marginally to 3.5 percent, Statistics South Africa (Stats SA) said on Wednesday.

December 2010 CPI was 0.1 percent lower than November’s 3.6 percent. In December, prices rose by 0.2 percent, mainly due to higher fuel prices and rent costs.

Although December’s figure came close to market expectation, Nedbank economist Carmen Altenkirch said the favourable figure is not likely to sway the Reserve Bank in favour of cutting interest rates when it makes its decision public tomorrow.

The Reserve Bank’s Monetary Policy Committee began its two-day meeting on interest rates on Tuesday – the first in 2011. Nedbank expected CPI to come in at 3.7 percent.

“The SARB will continue to focus on the medium-term inflation outlook, which although favourable, probably does not give them sufficient comfort required for further easing,” Altenkirch said.

At the MPC’s last meeting in November 2010, the repo rate was cut by 50 basis points, down to South Africa’s lowest in 30 years to 5.5 percent. The repo rate has been cut by 650 basis points since December 2008.

Nedbank forecasts that inflation will tick up during 2011, ending the year around five percent, partly due to the low base established in the second half of 2010. However, rising food and fuel costs will also add to upward pressure on inflation, it said. – BuaNews

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Alan Straton

Chief Cook, Bottle Washer and Broom Mechanic at MyPE
Passionate about Port Elizabeth and definitely NOT packing for Perth. Alan's ethos is epitomised in the words of Nelson Mandela; "I have fought against white domination and I have fought against black domination. I have cherished the idea of a democratic and free society. If need be, it is an ideal for which I am prepared to die." See more articles by Alan.