The latest inflation figures were released this morning and they showed an increase from 6.3% year on year in August to 6.7% in September, which is a four year high. This increase in the CPIX (Consumer Price Index excluding mortgage rate changes) to 6.7% has come as a huge shock to many as analysts had predicted a rise to about 6.4% but no one really expected it to be this bad.

The headline CPI (Consumer Price Index) inflation also increased to 7.2% year on year in September from 6.7% in August.

This has clearly shown that there is a current inflation problem in South Africa. Analysts predict the CPIX to reach the 7% mark by the end of year with the way things are going. This will put added pressure on the Reserve Bank to decide whether it is time to stop the interest rate hikes or not in order to slow down the rate of inflation. The Reserve Bank governor, Tito Mboweni, had previously said that, inflation will peak at 6.8% in the first quarter of 2008 and then ease back into the central banks target of 3 - 6%. Now we are already at 6.7% before the first quarter of next year, so the governor’s prediction of 6.8% is going to be met but chances are the inflation rate could well be above 6.8% by the first quarter of next year.

The reason the inflation figure has gone up has been largely due to the increase in prices of food, housing, medical care and health expenses, household operations, education, transport, fuel and power with the increase in food prices being the biggest mover. The only thing the statistics show that has dropped in price is the price of clothing and footwear.

Where to from here you may ask? Well straight away after the latest figures were released, the Rand was 6.6720 to the dollar from 6.6830 before the figures were released. Let us know what your thoughts are with regards to these latest figures.

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