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Reactions to inflation

By Staff Writer

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Reactions to inflation 

The new inflation figures that were released by Stats SA yesterday have sparked reactions across the business world.

Here is what a few of the financial newswires had to say about the new data.

The Times zeroed in on food being a major driver of inflation.

The petrol price cuts had slowed down inflation but these were in part offset by rapidly rising food prices, which had a year on year inflation rate of 16.9%. The petrol price cut, caused vehicle running costs to deflate last month by 3.3%. The article finally expected inflation to come down to single digits next year, particularly with the new basket of goods used to measure it.

BUA news the government information portal reports that the rise in food prices were attributable to 'increases in the prices of grain products, meat, milk, cheese and eggs, fats and oils, coffee, tea and cocoa, vegetables, fish and other seafood, fruit nuts and sugar'.

The article noted that the inflation outlook was improving but also warned 'South Africans to take extra care when spending their money and bonuses this festive season'.

Justmoney agrees and says why not open a savings account instead of going on a splurge. BUA News also reported on the new inflation basket to come into effect in January 2009.

Business Report looked at inflation from the angle of political newcomers COPE. They quoted the head of their communications department Phillip Dexter as saying COPE wanted 'a debate on the appropriateness of the current target', with them being sceptical of the 3% to 6% band that has been targeted by the government.

COPE does not believe that South Africa will grow quickly enough if this target is kept to.

The Mail and Guardian surveyed the reactions of economists. They were of the opinion that the inflation figures had come in a little higher than expected, but they were not out of the range predicted.

The economists also believed that this inflationary decrease was now a downward trend and that it would lead to further cuts in the interest rate next year.

The Mail and Guardian carried a further story considering the outlook for interest rate cuts next year, with further rate cuts considered likely.

Business Day looked at the possibility of rate cuts as well. However their article warned that 'rand weakness will slow the process of disinflation, and there is no evidence yet that prices are slowing across a broad front'.

This indicates that while inflation may fall within the target range next year there are some doubts as to how long it will be able to stay there.

Justmoney says rather sit back and wait for inflation to slow significantly and wait out for those expected interest rate cuts. Make a budget and stick to it to see you into the New Year and then when the situation has improved it may be time again for a little treat.

   

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