Inflation shocker – highest since May 2009 – hits 7%. Points to further rate hikes, recession?

Brian Kantor has beaten down the South African Reserve Bank door on countless occassions. Repeating the idea that no matter what the bank does with rates, inflation is out of their control, and the latest CPI figures are starting to prove him right. Stagflation is a reality, and the bank should focus on growth instead. Avoiding a recession, and ‘junk’ status, should be a collective effort involving all government arms. And with the consumer under immense pressure, and expected to lead the recovery, a rate hike is the last thing that’s needed. There is still one more inflation reading before the next MPC gathering, which will have a huge bearing on what happens going forward. – Stuart Lowman

By Carin Smith

Cape Town – The annual consumer price inflation (CPI) was 7% in February 2016, up from 6.2% in January 2016 – when it breached the SA Reserve Bank’s target range, Statistics SA announced on Wednesday.

This is the highest rate since May 2009 when the rate was 8%. The CPI increased by 1.4% month-on-month in February 2016.

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Last week, Sarb governor Lesetja Kganyago announced a 25 basis-point hike in interest rates to 7% to help keep inflation in check. This was after Sarb’s monetary policy committee (MPC) decided to hike the repo rate by 50 basis points to 6.75% at its last meeting in January this year. This means the prime interest rate is now 10.5%.

The latest data shows that food and non-alcoholic beverages increased from 1.1 percentage points in January to 1.3 percentage points in February. The index increased by 8.6% year-on-year. Alcoholic beverages and tobacco decreased from 0.5 of a percentage point in January to 0.4 of a percentage point in February. The index increased by 7.6% year-on-year.

Transport increased from 0.9 of a percentage point in January to 1.3 percentage points in February. The index increased by 8.7% year-on-year. Miscellaneous goods and services increased from 1.0 percentage point in January to 1.1 percentage points in February. The index increased by 6.8% year-on-year. – Fin24

Source: http://www.fin24.com/Economy/shocker-as-cpi-breaches-sarb-band-yet-again-20160323

South Africa’s rising inflation points to more rate hikes

JOHANNESBURG, March 23 (Reuters) – South Africa’s headline inflation quickened more than expected in February to its highest level in nearly seven years, adding pressure on the central bank to raise interest rates further despite weak economic growth.

Inflation hit 7 percent year-on-year in February from 6.2 percent in January, data from Statistics South Africa showed on Wednesday, the highest rate since May 2009.

“Today’s surprisingly high inflation figure will probably lead the South African Reserve Bank to accelerate its programme of rate hikes,” Capital Economics’ Africa analyst John Ashbourne said.

“This will be very painful for an economy that is struggling to avoid recession.”

Economists polled by Reuters had expected CPI to come in at 6.7 percent in February.

Read also: More pain as inflation points to March rate hike. What about growth?

On a month-on-month basis, prices were up 1.4 percent after an increase of 0.8 percent in the previous month.

The rand recouped losses against the dollar after the data was released, trading at 15.2475 against the greenback from a session low of 15.2800.

The Reserve Bank raised its benchmark repo rate by 25 basis points to 7.0 percent last week, after a 50 basis points hike in January, saying CPI would average 6.6 percent this year, above a 3-6 percent target band.

The rate hike came in spite of lower growth forecasts for Africa’s most industrialised economy.

The central bank expects expansion of just 0.8 percent in 2016, slightly lower than the Treasury’s forecast of 0.9 percent.