Rate cuts back on the agenda: Roux
November 25, 2009
Inflation is now heading towards the mid-point of the 3-6 percent target band, which should put further rate cuts back on the agenda, according to Andr Roux, head of fixed income, Investec Asset Management.
He said in a note on Wednesday that CPI inflation has fallen within the target band for the first time in 30 months.
"What a welcome gift for the new Reserve Bank Governor."
Roux noted that inflation among tradable goods is "evaporating" on the back of a strong rand, and services inflation was also better than expected.
"The only negative was a bounce in vegetable prices, but this should unwind soon," he concluded.
The increase in South Africa's consumer price index (CPI), which is used by the South African Reserve Bank (SARB) for its inflation target, was up 5.9 percent year-on-year (y/y) in October from 6.1 percent y/y in September, Statistics South Africa (Stats SA) said on Wednesday.
CPI was at 0.0 percent month-on-month (m/m) after increasing 0.4 percent in September.
It was expected to have receded to 5.9 percent year-on-year (y/y), according to a survey of 13 leading economists by I-Net Bridge.
Forecasts among the economists ranged from 5.7 percent to 6.1 percent. Only two economists saw it above the upper 6 percent limit.
The central bank kept rates on hold again at 7 percent this month. - I-Net Bridge
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