CREDIT growth soared to yet another record last month, at 27,5% year on year, fuelling speculation that the Reserve Bank may hike interest rates beyond next week’s expected rate hike.

The continued rise in private-sector credit extension (PSCE) indicates that consumers had not yet heeded calls by the Bank to slow consumption expenditure, analysts said yesterday, increasing the possibility of further rate hikes next year, and sealing the case for a rate hike ahead of the festive season.

Meanwhile, consumer inflation slowed marginally last month, although not enough to warrant a pause in the current rate hike cycle. CPIX inflation (consumer inflation less mortgage costs), the Bank’s targeted measure of inflation, was 5% last month, down from 5,1% in September. A Reuters poll showed that economists were expecting CPIX at 4,8% year on year. The Bank has warned that it will not hesitate to tighten monetary policy more should its inflation target be threatened.

“A hike next week looks almost certain and chances of a further rate hike early next year are also increasing,” Absa Capital interest rate strategist Nyiko Mageza said yesterday, commenting on the record credit growth data. Data released yesterday by the Bank shows that PSCE rose from 25,3% year on year in September, as M3, the broadest measure of money supply, rose 23,5% year on year, up from 21,9% in September.

Standard Bank economist Shireen Darmalingam said these levels of growth were attributable to the favourable macroeconomic conditions that had continued to support money supply growth over the past few months. Mortgage advances, as usual, made the biggest contribution to overall PSCE last month, rising 30,9% year on year, up from 29,6%.

“While a material slowdown in the months ahead is not envisaged, mortgage advances are expected to start tapering off as the effects of tighter monetary policy become entrenched,” Darmalingam said. CPIX data released yesterday by Statistics SA shows that inflation rose 0,1% month on month. Headline inflation (CPI) rose 5,4% (5,3%) year on year.

The year-on-year slowdown in CPIX was only temporary and rising food prices were the main contributors to the rise in consumer inflation in the month, analysts said. “Our outlook shows continued upward pressure on consumer price inflation due to the steep increase in food prices, which account for over a quarter of CPIX,” Investec economist Annabel Bishop said.

Food inflation rose to a new three-year high of 9,4% year on year on the continued sharp rise in meat and grain prices, the two most heavily weighted components of the food price index. “Food inflation remains a serious concern,” said Eskom treasury economist Kabelo Masike. “Given the backdrop of a contracting agricultural sector, food prices could remain under pressure in the short term,” he said.

The 50c/l drop in the petrol price led to a 0,4% reduction in the month-on-month contribution of transport costs to the CPIX index. “We do not expect this trend to continue, but, as petrol prices fell only 21c/l last month, a possible cut of only 6c/l is expected in December,” said Bishop.