Inflation Figures Point to Interest Rate Cuts

This article is courtesy of RealEstateWeb (“New inflation figures pave way for interest rate cuts” – 30 October 2008)

The latest inflation figures will give the nation hope that interest rates will drop in 2009. This comes after inflation levels left the residential property price growth and sales volumes in a sad state.

According to Cadiz African Harvest Asset Management, the latest Statistics SA producer price figures, are paving the way for a decline in rates form early 2009. He added that September’s figures was significantly lower than market watcher were expecting; producer inflation fell to 16,0% from 19,1% in August while the expected rate was 18,3%.

Hardien stated that the key inflation drivers at the producer level remain food, oil and other commodity prices. These groups of prices have turned slightly while dollar commodity prices have turned decisively. While this has been partially negated by rand weakness, the extent of the dollar declines have tended to overwhelm the rand’s moves.

The bottom line, according to Hardien, is that while significant upside risks to inflation remain, they are likely to be dwarfed by strong cyclical factors over the near-term – resulting in inflation continuing to decline through 2009.

Buy property in South Africa