Mboweni expects a slow down
The Guv, Tito Mboweni, gave a speech at a diplomat's dinner last night.
The Mail and Guardian reported that Mboweni noted that our inflation outlook had improved and that hopefully the downward movements we have seen since August was becoming a trend. This may bode well for any early cut n the interest rate. Guv Tito also pointed out that South African banks had largely escaped the financial crisis.
Sound policies including the National Credit Act and exchange controls have limited our exposure to the 'toxic' securities that have brought down the rest of the world's financial systems. However Mboweni also noted that there were obstacles still in our path notably the impact on imports caused by the weakening Rand against international currencies.
The Guv was confident that we would avoid a recession but warned that the real economy would be hit by the global collapse and that a slowdown was to be expected.
Business Day covered the Reserve Bank Governors' speech highlighting that Mboweni believes that policy makers should 'take note' of both the lower inflation and slower growth when they make their decisions. The repeated that Mboweni was 'hopeful' that inflation was now on a downward trend. The rest of the article looked at international economics.
iAfrica also covered the governor's speech quoting him as saying that the outlook "is not viewed as being particularly favourable". In a related article iAfrica spoke to an economist who felt that all the necessary space for an early rate cut to happen was there. This same economist has received a lot of flak recently for suggesting that in reality inflation was already 2 percentage points lower than published due to the re-weighting of the CPI basket of goods. However it seems that the market believes him as it is already pricing these figures in. He also reckoned that a further percent would be cut due to effects such as the lower price of oil. He advised policy makers to rather target bolstering consumer confidence and propping up new vehicle sales.
The Times reported that PPI or Producer Price Index has dropped. This is the measure of inflation for producers, which means how much more is it costing to make stuff. These drops are due to lower power and petrol prices but it was noted that these savings were not being passed on to the consumer.
The Mail and Guardian also covered these figures, noting that they had dropped from 16% to 14.5%. They carried comment from Nedbank, stating that 'inflationary pressures were moderating'.
In other news The Dispatch reported on the SA institute of race relations annual review. There was concern that income inequality has risen over the last ten years, although they pointed out that this could in part be explained by a general increase in incomes.