Uncertainty lingers on the course of inflation
March 25, 2009
By Ethel Hazelhurst
While the outlook has brightened for consumers, there is still a lot of uncertainty about the course of inflation.
In his monetary policy statement yesterday, Reserve Bank governor Tito Mboweni highlighted the perils posed by "cost push pressures, particularly from administered prices" and identified "higher-than-expected electricity tariff increases".
He said the decline in inflation might be delayed by "continued high rates of increases in food prices, despite marked declines in producer price food inflation".
Consumer price inflation is expected to average 8.1 percent this quarter, falling below 6 percent in the third. But because of technical base effects, "it will marginally exceed the upper end of the inflation target range" after that, before returning within the range in the second quarter of next year.
The stubborn inflationary pressures are proving a double whammy for consumers - by taking more money out of their pockets and also by delaying the pace at which interest rates can be cut.
That households are in trouble is confirmed by fourth-quarter data in Mboweni's statement. He reported that household consumption fell 2.7 percent, mainly as a result of a 20 percent contraction in the consumption of durable goods. - Ethel Hazelhurst
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