For the year ending April, CPIX inflation came in at 4.4% below market consensus expectations of 4.6% and unchanged from the previous month's figures.

The main contributor was the petrol price increase of 22c per litre. This contributed up to two thirds of the CPIX monthly change with the housing component contributing the other third. PPI came in above expectations at -0.2% year-on-year where expectations were for -0.7%. The previous month's figure was -1.2%. This is the first increase in some time, which may indicate upward pressure on the inflation rate. The monthly headline increase of 1% year-on-year was largely due to seasonal factors whilst the seasonally-adjusted increase came to 0,5% year-on-year. The largest contributor to the increase was Coal under the Mining and Quarrying section.

The shorter end of the NCD curve remained constant, while the longer end kicked up with the 12-month Jibar rate increasing by 16bps. The current 3-month rate is 8%. The Fra curve is predicting the 3-month rate in 7 months time to be 9.05% and the three-month rate in 12 months time to be 9.9%. This is indicative of expectations of a rate increase of 200bps within the next year as inflationary fears increase.

For the year ending April, CPIX inflation came i n at 4.4 % well below market consensus expect at ions of 4.7% and unchanged from the previous month' s figures.

The main contributor was the petrol price increase of 22c per liter which contributed up to two thirds of the CPIX monthly change with the housing component contributing the other third.

PPI came in above expectations at -0.2% year-on-year where expectations were for -0.7% and the previous month's figure was -1.2%. This is the first increase in some time, which may indicate upward pressure on the inflation rate. The monthly headline increase of 1% year-on-year was largely due to seasonal factors whilst t he seasonally adjusted increase came to 0,5% year-on-year. The largest contributor to the increase was Coal under the Mining and Quarrying section.

The shorter end of the NCD curve remained constant, while the longer end kicked up with the 12-month Jibar rate increasing by 16bps. The current 3-month rate is 8%. The Fra curve is predicting the 3 month rate in 7 months time to be 9.05% and the three month rate in 12 months time to be 9.9%. This is indicative of expectations of a rate increase of 200bps within the next year as inflationary fears in crease.

Although CPIX increased from 4.2% year on year in January to 4.8% in February, this was still below expectations of 5.0%. The main contributor to this increase was the petrol price increase of 30c/litre, which contributed to more than half the month-on-month increase in inflation. The minimum wage introduced in the second half of 2003 has also contributed to a lesser extent to the increase. Notable risks for the CPIX numbers going forward will be food and oil prices, as well as any depreciation of the rand.

PPI numbers came in in-line with expectations at -1.1% year-on-year in February against -1.4% in January. The monthly increase was mainly due to seasonal effects. February also saw an increase in the M3 money supply, due to a decline in government deposits as a result of the redemption of the first tranche of the R150 and inclusion of promissory notes.

The Forwards Rate Curve (Fra curve) is indicating an expectation of the 3-month rate being around 8.6% in October, implying a rate hike of about 50bps. Longer end rates moved up this month with the three month Jibar moving up by 9 basis points, the six month moving up by 14 basis points and the 12 month moving up by 13 basis points. One-year NCD's are now trading at 8.6%.

The latest CPI-X numbers for November came in at 0.4%, in line with expectations. The PPI decline was greater-than-expected at -2.5% year-on-year, below market expectations of -2.0%, mostly as a result of continued rand strength. At the beginning of December, the markets were pricing in a 150 bps drop in the repo rate, consequently, the 3-month NCD rate dropped to a low of 7.25% and the 12 month NCD fell to a low of 7.05% prior to the MPC meeting. However, the markets were disappointed by the subsequent rate cut of only 50 bps. Rates picked up again after the meeting to 7.70% for the 3-month NCD and 7.95% for the 12-month NCD, an increase of almost 100bps over the rates at the beginning of the month.

Reasons cited by SARB for the lower-than-expected rate cut were uncertainty regarding the exchange rate, concern that the relatively strong drop in food inflation may reverse in 2005 and their continued concern regarding upward pressure from wage increases which will not be matched by increases in productivity. By the end of the month, the yield curve had therefore normalised to 7.85% for the 3-month NCD and 8.05% for the 12-month NCD. Current forward-rate agreements are less convinced of a further 50bps reduction in the repo rate in February since they are only pricing a 3- month rate in February that is 10-20bps lower than the current 3-month Jibar (the consensus of the banks' rates).