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Inflation jumps to 11.6 percent

by Michael Appel
on 30 Jul 2008
BuaNews Online
BuaNews Online

Inflation for June 2008 has jumped to 11.6 percent year-on-year (y-y), coming in 0.7 of a percentage point higher than May 2008, reported Statistics South Africa (Stats SA), Wednesday.

"The annual increase of 11.6 percent in the Consumer Price Index excluding interest on mortgage bonds [CPIX] was mainly due to annual price [increases] in food, transport, housing, household operation, medical care and health expenses, fuel and power, and education," said Stats SA.

Inflation between May and June 2008 increased by 1.1 percent due to increasing transport, food and housing costs, compounded by a significant 50 cent per litre petrol increase.

The South African Reserve Bank will be facing upside inflation ahead of the Monetary Policy Committee (MPC) meeting next month.

South Africans will be hoping the MPC decide to keep the interest rate stable or even cut it by 50 basis points and allow some reprieve from increasing food and fuel prices.

Despite a significant decrease in crude oil prices within the last month, oil prices are still one of the main drivers of inflation in the global and domestic market, coupled with global liquidity problems as a result of the US sub-prime mortgage crisis.

Speaking to BuaNews recently, Econometrix Treasury Management (ETM) economist Russell Lamberti said inflation was expected to peak around the 13 percent level within the next two or three months.

South Africa is still suffering under high inflationary pressures and the MPC bases its decisions on the inflation outlook - whether inflation is within or outside the inflation target band.

Economists believe the inflation will only return to within the 3 to 6 percent target band by the second quarter of 2010.

June's inflation figure is the 15 time inflation has breached the Reserve Bank's inflation targeting band.

The bank has increased interest rates by a cumulative 500 basis points or 5 percent since the inflationary cycle began in June 2006, and has this year raised interest rates by 1 percent raising the prime lending rate to 15.5 percent. - BuaNews


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