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‘Consumer inflation confirms rate hike’

Economy

Johannesburg - The consumer price index (CPI) figure for June is confirmation of the SA Reserve Bank's motivation for the recent interest rate hike, Seifsa said on Wednesday.

“The June figure of 6.6 percent is high, and may fuel expectations of more to come,” Steel and Engineering Industries Federation of SA (Seifsa) chief economist Henk Langenhoven said in a statement.

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Cape Town. 100219. South Africa is coming out of its first recession in almost two decades reasonably rapidly, says Reserve Bank Governor Gill Marcus. Marcus also said monetary policy remains directed towards containing inflation. The central bank has cut rates by 500 basis points since December 2008, and left the repo rate flat at 7,0% at its last four meetings. Picture Mxolisi Madela

Seifsa is the national employer federation in the metal and engineering industry.

“This is the key problem facing the governor of the Reserve Bank - managing inflationary expectations with interest rate increases without stunting domestic growth, all the while keeping an eye on what other central banks are doing.”

CPI for all urban areas remained unchanged in June.

The CPI was 6.6 percent, the same as in May, Statistics SA said.

On average, prices increased by 0.3 percent between May and June this year.

Langenhoven said the next producer price inflation numbers would indicate whether the cost pressures were sustained.

The two biggest risks contributing to upward pressure on costs were the exchange rate weakening and the continued oil price increase.

“We all hope that, on balance, these factors will contribute to a positive outcome of the already precarious choices the country needs to make, and not worsen it,” he said. - Sapa

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