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Johannesburg - High levels of inflation are no friends of the working class and
the poor, SA Reserve Bank governor Tito Mboweni said on Thursday.
This followed his announcement that the Monetary Policy
Committee (MPC) of the SARB had decided to keep the repo rate
steady at 7.5 percent per annum on concerns about inflation.
While inflation has eased, the pace of this easing has clearly
not been enough for the SARB.
The central bank has lowered rates five times since December
while consumer price inflation remained stubbornly above the bank's
3% to 6% target range.
Mboweni warned that price pressures might grow in particular
from electricity price increases and other administered prices, as
well as nominal wage increases which had generally been in excess
of inflation.
He pointed out that in the first quarter of 2009, the increase
in unit labour cost over four quarters amounted to 11.2%.
Mboweni was also worried about oil prices, pointing out that the
international oil price had re-emerged as a potential upside risk
to the inflation outlook.
"The price of North Sea Brent crude oil reached levels in excess
of $70 per barrel in the past week, before declining to current
levels of around $67 per barrel.
"As a result of the higher international product prices, a
further petrol price increase is likely in July," he said.
"I am concerned that inflation remains stubbornly high and the
rate of decrease small."
Asked what he thought of Eskom's 31.1% tariff hike
granted to the parastatal earlier on Thursday, Mboweni said it was
a threat to inflation.
"I'm quite certain the MPC will look at this when it next
meets," he said.
Asked if the SARB would consider altering its inflation target
of 3% to 6%, the governor said that government had decided
upon the target and not the SARB.
"This question belongs somewhere else," he said.
"It is the SARB's task to maintain inflation at low levels -so
if anyone a sked me for advice on targeting, I'd start off from
this."
Asked if there would be another rate cut this year, Mboweni
replied: "I don't know."
"But if I was the only member of the MPC, I'd say 'don't expect
a rate cut,'" he added.
- Sapa