Mboweni Hikes Rates By 50bp

Reserve Bank governor Tito Mboweni has raised interest rates by 50 basis points.

He’s also warned CPIX is going to stay above his target range longer than predicted.

The rate hike lifts the repo rate to 12%. And the prime lending rate is likely to rise to 15.5%

That’s half the rise the market had been predicting.

Mboweni says the outlook for inflation is deteriorating, amid soaring food and fuel prices. Eskom’s planned price hike is also a big risk.

Mboweni’s predicting CPIX peaking at 12% in the third quarter of this year. He says it won’t fall into his 3-6% target range until the third quarter of 2010.

That’s at least six months later than Bank forecasts made just days ago.

CPIX hit 10.4% in April.

Meanwhile, the BER’s raising its forecast for CPIX in its latest survey of analysts, business and union predictions.

The forecast for this year is raised from 7.8% to 8.9%, from 7% to 7.9% for next year, and from 6.7% to 7.2% in 2010.

Source: Andrew D’ercole, Summit Reporter