Category Healthcare
SUB CATEGORIES General  |  HIV |  Medical Schemes | 

Cycle coming to a stop?

27 January 2004 Angelo Coppola

Inflation in line with expectation, but interest rate easing cycle has come to an end.

The inflation figures released today for December were more or less in line with consensus expectations and put the CPIX average for the year (6.8%) in close range of the 3-6% inflation target, said Metropolitan Asset Managers' Réjane Woodroffe.

She believes the good news on inflation now seems to be over.

"Maize price futures have doubled from the lows seen early last year, oil prices remain buoyant and the Rand remains vulnerable to a deteriorating trade account and narrowing interest rate differentials," she said.

She further added that the numbers will be calculated from a much lower base this year, removing the favourable technical effect on the numbers enjoyed last year. She expects CPIX to bottom by March this year.

Woodroffe pointed out that at its last Monetary Policy Committee meeting, the South African Reserve Bank (SARB) expressed concerns about the strength of consumer demand, unfavourable climatic conditions and their potential impact on food prices, the start of a rising trend in global interest rates and the stickiness of wage settlements around the 9% level.

"This cautious note was accompanied by a 50bps cut, 1% less than the market had expected. It seems the easing cycle has now come to an end. We expect the next move in interest rates to be up, albeit only towards the latter part of the year," she said.

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