Wednesday, November 25, 2009

Lower inflation unlikely to lead to interest rate cuts

By Ofentse Mokae
25 November 2009


Economists are warning that although consumer price inflation fell back into the Reserve Bank's target range of three to six percent in October, it is unlikely to persuade the monetary policy committee to lower interest rates.

According to Statistics SA, CPI eased slightly to five-point-nine-percent year-on-year in October.

Investec group economist Annabel Bishop says inflation is unlikely to consistently remain within the target range.

She says salary and wage increases are still running well above six-percent. Eskom proposed price hikes also remain a worry.

Meanwhile, the Congress of South African Trade Unions said today it wanted a total overhaul of the economy.

The trade union federation favours a Rand exchange rate of about 10 to the dollar to boost the country's weak manufacturing sector.

Cosatu general secretary Zwelinzima Vavi says South Africa inherited an economy that was designed to serve the interests of a small minority.

He says the country has not developed an industrial strategy. The Rand has gained about 25-percent against the dollar so far this year.

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