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Johannesburg - Increasing risks to South Africa's inflation outlook was one of the warnings from Thursday's announcement of the Reserve Bank's Monetary Policy Committee meeting (MPC), with an economist saying that an interest rate hike could come as early as November this year.
"We believe that we will see the first hike in November," said Annabel Bishop, economist at Investec Group Economics.
"If the reserve bank does not increase rates at that stage, the real interest rate will fall below 1% which is not in line with what they have done historically," she added.
Risks to the inflation outlook, according to Reserve Bank governor Gill Marcus, are rapidly rising international oil and food prices.
Administered prices - which comprise electricity tariffs, petrol prices and wage increases, were highlighted as threats to consumer inflation.
As a result, the central bank has revised its inflation outlook higher to an average of 4.6% for 2011 and 5.3% for 2012 from 4.3% this year and 4.8% next year.
The forecast is in line with analysts' projections.
The MPC voted to leave the repo rate unchanged at 5.5%, keeping rates at a 30-year low.
Isaac Matshego, economist at Nedbank Capital, said the consumer inflation rate should breach the upper level of the Reserve Rank's 3% - 6% target band in 2013.
Bishop's vote for a hike is a minority view with most economists punting a tightening in the cycle only next year.
"In view of the upward revision in the growth forecast and the inflation outlook, our view is that rates will remain on hold throughout 2011 with the first hike in the first quarter of 2012," said Gina Schoeman, economist at Absa Capital.
The governor presented a relatively upbeat picture of the economy, saying there were encouraging improvements in consumer spending and in some parts of the manufacturing sector, such as automotives.
However, the eurozone's debt crisis remains a threat to the recovery of the South African economy.
"The crisis is a big issue for us and we will be monitoring it," said Marcus.
- Fin24.com
"We believe that we will see the first hike in November," said Annabel Bishop, economist at Investec Group Economics.
"If the reserve bank does not increase rates at that stage, the real interest rate will fall below 1% which is not in line with what they have done historically," she added.
Risks to the inflation outlook, according to Reserve Bank governor Gill Marcus, are rapidly rising international oil and food prices.
Administered prices - which comprise electricity tariffs, petrol prices and wage increases, were highlighted as threats to consumer inflation.
As a result, the central bank has revised its inflation outlook higher to an average of 4.6% for 2011 and 5.3% for 2012 from 4.3% this year and 4.8% next year.
The forecast is in line with analysts' projections.
The MPC voted to leave the repo rate unchanged at 5.5%, keeping rates at a 30-year low.
Isaac Matshego, economist at Nedbank Capital, said the consumer inflation rate should breach the upper level of the Reserve Rank's 3% - 6% target band in 2013.
Bishop's vote for a hike is a minority view with most economists punting a tightening in the cycle only next year.
"In view of the upward revision in the growth forecast and the inflation outlook, our view is that rates will remain on hold throughout 2011 with the first hike in the first quarter of 2012," said Gina Schoeman, economist at Absa Capital.
The governor presented a relatively upbeat picture of the economy, saying there were encouraging improvements in consumer spending and in some parts of the manufacturing sector, such as automotives.
However, the eurozone's debt crisis remains a threat to the recovery of the South African economy.
"The crisis is a big issue for us and we will be monitoring it," said Marcus.
- Fin24.com
