Reserve Bank optimistic about inflation

THE SA Reserve Bank is more optimistic about inflation than most South Africans, according to figures published yesterday.

THE SA Reserve Bank is more optimistic about inflation than most South Africans, according to figures published yesterday.

Central Bank governor Tito Mboweni said his staff expected price growth to return to the target range of 3 to 6 percent by mid-2010 and to stay in range throughout the forecast period, which runs to the end of 2011.

In contrast, the Bureau for Economic Research at Stellenbosch University said inflation expectations had jumped in the past month with a new consensus that price increases would remain around the current level of 8 percent until the end of 2011.

The BER, which conducts research on behalf of the Central Bank, said economists were the most optimistic and trade unions the most pessimistic of the groups polled.

Inflation expectations, which influence wage demands, are a primary driver of inflation and an important focus of the Central Bank's inflation strategy.

The BER polled economic analysts, business leaders and trade unions.

Though the expectations reported by analysts had deteriorated the most, they were still the most optimistic group. They upped the outlook for 2009 to 6,9 percent from the 6,1 percent forecast in the first quarter and saw inflation down to 5,6 percent by 2011.

Business leaders expected inflation of 9,4 percent this year and 8,3 percent in 2011. They had forecast 9,2 percent for this year and 8,3 percent for 2011. Trade unionists anticipated inflation of 9,7 percent this year and 10,1 percent next year.

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