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Wednesday, 3 April 2019

Energy prices to rise 20.6% this year- Beltone

Energy prices to rise 20.6% this year- Beltone: Energy prices will increase by 20.6% this year as the government pushes ahead with implementing the automatic fuel pricing mechanism, Beltone Financial said in a note on Monday. The investment bank anticipates that an increase of this magnitude will result in a 2.5-3.5% rise in inflation later this year. The government on Monday introduced the mechanism which is designed to allow local prices of petroleum products to reflect changes in the global oil market. Prices could rise by as much as 10% every quarter under the new system.

What does this mean for interest rates? Beltone thinks that a single 100 bps rate cut before the end of the year is the most likely scenario, although it cautions that this will “delay possible domestic investment appetite, leaving economic growth relying mainly on mega-project momentum.” However, depending on the inflation figures over the next two months we might well see a 100 bps cut during the next MPC meeting in May.

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