Kewtown Flats
You are Here: News -> Inflation dives a significant 1.8 percent

Inflation dives a significant 1.8 percent

Return to previous page.

Inflation dives a significant 1.8 percent

by Michael Appel
28 Jan 2009
BuaNews Online
BuaNews Online

The latest 1.8 percent drop in inflation figures could mean good news for cash-strapped South Africans and struggling home owners.


Statistics South Africa (Stats SA) reported on Wednesday that the Consumer Price Index excluding interest on mortgage costs (CPIX) dropped significantly in December 2008 from 12.1 percent to 10.3 percent year-on-year (y/y).

The drop in inflation coincides with the massive drop in fuel prices at the beginning of this month as well as the 50 basis point or half a percent cut in interest rates announced by the Reserve Bank's Monetary Policy Committee (MPC) in December 2008.

The Reserve Bank's tightening of monetary policy that informed interest rate decisions for much of 2008, appears to have halted inflation.

An inflationary cycle beginning in June 2006 led to the MPC raising interest rates 10 times or a cumulative 5 percent until the repo rate was left unchanged at 12 percent in August 2008.

Inflation has been outside the Reserve Bank's inflation targeting band of 3 - 6 percent since June 2008.

The central banks Monetary Policy Committee (MPC) lowered the repo rate by half a percent when it last met in December 2008, which was the first such drop in the interest rate following the consecutive rate hikes.

"We are likely to see steady interest rate cuts all the way through to the middle of this year ... but there are still possible inflation risks such as a weakening Rand which will make the Reserve Bank cautious," economist at Econometrix Treasury Management (ETM), Russell Lamberti told BuaNews recently.

Director at the Bureau for Economic Research (BER) Professor Benjamin Smit told BuaNews recently their official forecast is for a 250 basis point or 2.5 percent cut in the interest rate this year.

Investment Strategist at Investec Asset Management, Michael Power, similarly told BuaNews he believes there will be an interest rate cut of between 2 and 3 percent in 2009.

The repo rate, which is the rate at which the Reserve Bank lends money to commercial banks, is currently sitting at 11.5 percent, while the prime lending rate, which is the interest rate consumers are charged for lending from commercial banks, is presently 15 percent.

With inflation coming down quite substantially, all eyes will be on the MPC when they meet again on 4 and 5 February 2009, to see whether they cut interest rates aggressively by 100 basis points, or a mild 50 basis points. - BuaNews

Return to previous page.

From our Directory

Do you need professional assistance in taxation matters? Ascend Business Solutions in Lansdowne are professional Accountants and Business Consultants with expertise in the SMME sector. Give them a call on 021-6747690


Do you need a video or DVD of an event or special occassion? For Keepsake Video Services creates videos of weddings, birthday parties and other special events. Call them now on 0727296628.


Legendary Printing in Belgravia Estate, Athlone is an Internet Cafe that also offers creative business design and PC repair, maintenance and sales services. Give them a call now on 0216975756.



Contact Us | About athlone.co.za | Copyright | Advertising | Disclaimer

Website Design by BMSC-Online
XHTML CSS