Johannesburg - Rising food and fuel prices in South Africa were problems that had to be dealt with, central bank Governor Tito Mboweni said on Thursday, warning that consumers must "tighten their belts".
"Oil prices are a problem we have to deal with ... food prices are a problem and we have to deal with them," he told reporters, adding fighting inflation remained the main challenge for monetary policy.
"Inflation is elevated, we must all tighten our belts."
South Africa's central bank has raised its repo rate by 350 basis points to 10.5% since June last year to try tame inflation and robust consumer spending.
But the targeted CPIX continues to accelerate, driven largely by food and fuel costs, and most analysts expect further policy tightening next week.
CPIX soared to 7.3% year-on-year in October, a four-and-a-half-year high and galloping away from the top end of the bank's 3% to 6% inflation band.
'No to subsidies'
Mboweni said oil and food may be external factors but they still impacted on pricing in South Africa. However, he dismissed calls to introduce fuel subsidies and food price controls.
"Do we want to do that? Once you introduce subsidies it is difficult to take it away."
Keeping inflation low was the best way to help the poor, with price increases affecting them more acutely than the rich, he said.
The Congress of SA Trade Unions (Cosatu) has criticised the central bank's determination to tame inflation through interest rates, and have demanded the removal of inflation targets.
But Mboweni said economic policy, including inflation targeting, was unlikely to change even if there was a change of leadership within the ruling African National Congress and country.
Cosatu and the Communist Party, are backing ANC deputy president, Jacob Zuma, in a race against incumbent President Thabo Mbeki to take over the leadership of the party.
If Zuma wins the election at an ANC congress next month, he is almost certain to succeed Mbeki - who is trailing Zuma in nominations ahead of the meeting - as national president in 2009.
Cosatu has also opposed the largely market-friendly policy advocated by the Mbeki administration, raising concerns that Zuma will shift policy to the left.
Mboweni said policy foundations were too strong for anyone to dismantle, even if the current group of leaders - himself, Mbeki and Finance Minister Trevor Manuel - were to be replaced.
"Economic policy is not going to change, anybody who tries, will face trouble ... I think the foundations are far too strong for anybody to try and weaken (them)," he said.
"The ancient regime (Mboweni, Mbeki and Manuel) might be gone, but the foundations are too strong."
Mbeki cannot serve a third term as national president after 2009 even if he wins the ANC presidency, while Mboweni's second term as central bank governor also ends in 2009.
Mboweni said there may be some people who wanted those associated to current economic policy to leave, but he stressed he would not resign.
"I am not about to resign ... I will serve my tenure to the last."
On international economic growth, he said the fallout from the subprime mortgage crisis in the US may be larger than expected in financial markets, but were unlikely to dent global growth.
- (Reuters)