Annual consumer price inflation shot up at a rate of 4.5% - should we worry?

Annual consumer price inflation (CPI) was 4.5% in January, up from 4.0% in December, buoyed by, among other factors, increases in fuel prices.

The Money Show's Bruce Whitfield asks George Glynos of ETM Analytics, if this is cause for major worry.

I don't think we should be worried yet, this was very much in line with expectations. There is not anything dramatic to pull out of this.

George Glynos - Co-Founder, Director and head of Research - ETM Analytics

I think the more important trend that is unfolding is the trend of disinflation - in other words the lack of monetary space for inflation to take hold in any meaningful way. There's a credit cycle that unfolds and that credit cycle is a function of all borrowing that takes place in the private sector, corporate or household. That credit cycle ultimately drives growth and money supply. The stronger the growth in money supply the more space there is for inflation to breed. Quite frankly at the moment we have one of the tightest credit cycles in South Africa's history - which means In SA there is not a lot of room for inflation to take hold - so inflation for the remainder of the year is likely to be suppressed.

George Glynos - Co-Founder, Director and head of Research - ETM Analytics

Even in the event of a downgrade, just remember, a tight credit environment is what you'll find even if you get a price shock such as fuel prices shooting up. All it means is that within the household budget people would have to reprioritise expenditure. Those price pressures come through and that is the element that keeps inflation constrained.

George Glynos - Co-Founder, Director and head of Research - ETM Analytics

Listen to the full interview below.

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