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CPI figure unlikely to influence bank on interest rates

Consumer inflation was 5.7 percent last month, according to Statistics SA – in line with the Bloomberg consensus. The figure, released yesterday, is unlikely to influence the Reserve Bank’s monetary policy committee, which will announce this afternoon whether it will shift the bank’s repo rate from 5 percent.

Economists expect no move in either direction.

Inflation may rise in the months ahead, given the reweighting and rebasing of the consumer price index (CPI), which will be reflected in this month’s figures, to be released next month.

Gina Schoeman, an economist at Citi, said she had calculated that “if the rebasing and reweighting impact were introduced on the most recent November CPI print (of 5.6 percent), it would have measured 0.3 percentage points higher at 5.9 percent”.

The number is close to the top of the Reserve Bank’s 3 percent to 6 percent target range.

“Specifically, rebasing would have deducted 0.45 percentage points while reweighting would have added 0.72 percentage points,” Schoeman said yesterday.

There are positive features of the latest CPI data. Elna Moolman, the South Africa economist at Renaissance Capital, noted that food inflation slowed last month to 7 percent from 7.5 percent in November. She said meat inflation declined to 4.8 percent from 6.4 percent and grain inflation to 7.3 percent from 7.9 percent.

But she predicted food inflation would be a key driver of the inflation profile this year. “We expect continued upward pressure in the near-term, although year-on-year inflation should be modest by late-2013 (partly owing to base effects).”

John Loos, the consumer strategist at FNB, said that the average CPI inflation rate for last year was 5.6 percent, “which represents the second consecutive year of a rise in the average annual CPI inflation rate, from 4.3 percent in 2010 and 5 percent in 2011”.

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