CPI printed pretty much in line with consensus at 6.4% year-on-year. This is still above the upper target range of 6%. PPI contracted at 4% year-on-year, slightly more than the previous month of -3.8%. Private sector credit extension came in at 2.3% and money supply at 5.5% year-on-year. Both figures were below the market expectation again highlighting the difficult conditions facing the local consumer.

When the SARB met in September, the repo rate was unchanged at 7%. This was no surprise to the market. The next meeting of the Reserve Bank Monetary Policy Committee will be in October. The FRA curve expects rates to be held steady for the next few quarters with the first rate hikes only expected in the second half of 2010.

CPI printed marginally above consensus expectations at 8% year-on-year with PPI well below market expectations. Private sector credit extension and money supply came in well below market forecasts. When the SARB met in June 2009, Governor Mboweni surprised the market by keeping the repo rate on hold at 7.5%.

Early in March, 5ARB Governor Mr Tito Mboweni announced that the 5ARB had rescheduled MPC meetings over the remainder of 2009. More frequent meetings could offer the Bank more flexibility, allowing it to be more responsive to the changes in the global and domestic environment. So when the Reserve Bank met in March, the 100 basis points cut in the repo rate to 9.5% was in line with consensus expectations. 5ARB Governor Tito Mboweni said that the decision was based on an improved medium-term outlook for inflation and the volatile global environment. In his speech, Mboweni emphasised widening output gaps and the "favourable inflation trend over the medium term".

CPI for the year to February 2009 printed at 8.6% compared to 8.1 % in January 2009, above consensus expectations of 8.1 %. This means that the declining trend of the last five months has been broken, although it should be noted that this was a high survey month in which a number of items are re-measured. Lower than expected PPI for February 2009 year-on-year fell to 7.3% from the 9.2% recorded in January year-on-year.

PSCE growth was slightly above consensus expectations slowing from 11.9% year-on-year in January 2009 to 11.1 % year-on-year in February 2009. This is the lowest growth rate since November 2004. The growth of M3 for February 2009 printed higher than expected at 13.2%.

The Forward Rate Agreement curve (FRA) still implies further interest rate cuts during 2009.

The Money Market Fund currently invests in a variety of investments that have maturities ranging from 1 day (overnight money) to 12 months, dependent on the amount of yield enhancement on offer for longer dated deposits. The current average maturity of the Fund is 80 days.

As at 31 March 2009 the Fund's exposure to the highest rated short term instruments as assigned by international rating agencies was 95%. International rating agency, Fitch, assigns a F1 +(zaf) rating to denote its highest short term rating. The Fund does not have exposure to F2 (zaf) rated instruments even though regulations do not prohibit money market funds from taking such exposure. The Fund does not have any exposure to derivative financial i nstru ments.

The CPIX inflation outcome for the year to November 2008 was 12.1% compared to 12.4% in October 2008, but higher than the consensus forecast of 11.9%. The consensus outlook is that inflation is expected to moderate further over the coming months. The South African Reserve Bank inflation forecast now falls within the 3% - 6% target range by the third quarter of 2009.

Producer Price Inflation for November 2008 moderated to 12.6% from 14.5% in October 2008, and this was significantly below the market's expectation. The main cause was the lower fuel prices during the month. The decline in PPI usually feeds into the CPI numbers which bodes well for future inflation if PPI follows this downward trend.

In December 2008, the South African Reserve Bank reduced interest rates by 50bps taking the repurchase rate to 11.5%. The Forward Rate Agreement curve (FRA) below implies several interest rate cuts during 2009 (the blue line represents the latest curve).

As at 31 December 2008 the Fund's exposure to the highest-rated, short-term instruments as assigned by international rating agencies was 96%. International rating agency, Fitch, assigns a F1+(zaf) rating to denote its highest short-term rating. The Fund does not have exposure to the lower-rated F2 (zaf) instruments even though regulations do not prohibit money market funds from taking such exposure. The Fund does not have any exposure to derivative financial instruments.