February PPI may spark rate hike
Fri, 28 Mar 2008The Reserve Bank is likely to pump up rates in April following an increase in the producer price index released on Thursday, an economist said.
South Africa's producer price index (PPI) for February rose 11.2 percent year-on-year from 10.4 percent year-on-year the previous month, Statistics SA said on Thursday.
The figure was higher than expected.
Earlier this week, a survey by I-Net Bridge found that the increase in the PPI was expected to be 10.8 percent year-on-year in February. Economists polled by Reuters forecast that annual PPI would come in at 10.7 percent.
Economist at ETM, Russell Lamberti, said the PPI data confirmed that SA had strong supply side inflationary pressures that were affected by imports which were in turn influenced by rand weakness.
He said that PPI would feed through to consumer price inflation which would now probably peak in the third quarter of the year.
"If there was any doubt that we'd have a rate hike in April, there's no doubt now. I am presently expecting a hike of 50 basis points," Lamberti said.
He added that the SA Reserve Bank might hike rates again in June.
