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Second Round Inflation Starting To Be Seen

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Around the world, it seems that the increased costs, driven by wildly escalating energy prices are starting to flare up:


Salary levels have been going up at six percent to seven percent a year. Unfortunately, household debt has been rising more than three times as fast.

Inflation is also beginning to stir. The most recent set of inflation figures put CPIX (the benchmark for inflation targeting) at four percent. This is well within the three percent to six percent band established by fiscal policymakers and is only marginally above the average CPIX level of 3.9 percent in 2005.


However, the trendline firms all the time. Producer price inflation is already up by an annualised 5.1 percent.

Internationally, inflation concerns have risen in the past six months. This week the US Federal Reserve increased rates by a further 25 basis points to 4.5 percent. Over the last six months, rate rises have been announced in Canada, Sweden, New Zealand, Korea, India and Thailand.

This upward bias is a strong signal that inflation remains a danger and that SA would do well to keep up its guard. The MPC should therefore be saluted for resisting the temptation to reduce rates.

After all, we are less than two weeks away from the 2006 Budget. Revenue may be R40-billion higher than originally forecast.


RISING prices for a wide range of goods and services have raised the threat that the Reserve Bank may be forced to raise interest rates over coming months.

The bank is expected to leave rates unchanged at its board meeting today. However, a survey of consumer prices conducted by the Melbourne Institute shows that inflation is beginning to rise.

University of Melbourne economist Don Harding said high petrol prices were starting to spill into other parts of the economy.

The survey, which tracks 90 groups of consumer goods and services each month, found an average price increase of 0.7per cent in January, lifting the annual rate of inflation to 3.1per cent.


As 2006 progresses, it may become apparent that for a more balanced and sustainable growth profile to become established, interest rates will have to rise further.

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  • 333 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
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      • up 5%

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