South Africa’s Mminele Says CPI Expectations Off `Near-6% Perch’

JOHANNESBURG (Capital Markets in Africa) South African inflation expectations have begun to subside and have moved toward the 4.5 percent point the central bank prefers to target, Reserve Bank Deputy Governor Daniel Mminele said.

But policy makers remain concerned about the risk of higher administered prices, including from electricity and water tariffs, he said in a speech in Johannesburg.

“The SARB’s quarterly projection model shows a continued convergence of inflation expectations, which are already off their near-6 percent perch of the earlier part of the decade, and seem to be steadily moving towards the midpoint of the target range,” Mminele said. “Still, when we met in January to assess the risks to this downwardly revised inflation outlook, the MPC found that, on balance, they were still skewed to the upside.”

The central bank kept the benchmark rate at 6.75 percent last month after raising it a quarter of a percentage point in November. A drop in oil prices and a firmer rand helped ease pressure on price growth, with the MPC forecasting the rate at 4.8 percent this year and in 2021. Inflation slowed to 4.5 percent in December.

The pass-through from a weaker rand in 2018 and a one percentage point increase in value-added tax were less than expected, while food prices and housing costs eased, Mminele said.

“The jury is still out on several of the potential causes of this latest disinflationary trends, and whether they will last,” he said.

Source: Bloomberg Business News