Speaking at a breakfast hosted by Safmarine and the Star yesterday, Mboweni said the global economy, while poised for continued growth of about 4,6% in 2004, was under pressure as a result of rising oil prices.
“The high oil prices are a serious matter for all central bankers due to its potential impact on growth and fuel inflation,” he said.
However, he added that, in South Africa, the Bank was also growing increasingly concerned about rising administered prices, which, in some instances, were double the six per cent high point of the country's inflation target.
He pointed out that administered prices carry a 25% weighting in the CPIX basket and that, in June, these prices rose by 11,2%. Despite this, overall inflation came in at 1,6% in July.
“If government wants to assist us in ensuring that we remain within the three to six per cent target range, then it has to ensure that these prices stay within the target,” Mboweni said.
He said he was encouraged by the fact that President Thabo Mbeki had highlighted the issue in his state of the nation address earlier in the year, and acknowledged that work was being done to ensure that these prices remained in check.
“If government could ensure that administered price came in at the mid-point o the inflation target, that would be wonderful,” Mboweni stated.
He also quipped that companies should attempt to peg executive pay increases to the same level.
However, Mboweni's statement comes at a time when many public enterprises are looking to increase capacity, accelerate deliver or modernise. Therefore, many are looking for tariff adjustments well above inflation.
Mboweni would not be drawn, though, on what impact his fears about oil and administered prices might have on future interest-rate decisions.
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