South Africa February money supply growth up sharply

South Africa's broadly defined M3 money supply grew 15.09 percent in February from a year earlier, data showed on Tuesday, after the January estimate was sharply revised upward for technical reasons.
Analysts said the data was a further signs that inflation is on the rise and could well prompt the Reserve bank to raise rates this year after it cut its key repo rate by 550 basis points to 8.0 percent last year.
In its quarterly bulletin last week, the bank said it had revised the growth rate for M3 - which can point to inflation pressures in the economy - upwards for the past two years.
On Tuesday, data showed it climbed to 12.2 percent from 10.1 percent previously.
But annual private sector credit (PSCE) growth was below expectations at 8.31 percent compared to an unrevised 10.50 percent in January.
A Reuters survey of economists put consensus forecasts for annual M3 growth in at 13.7 percent and for PSCE at 9.9 percent.
"Money supply numbers at these levels should raise the red light for inflation going forward," said Noelani King-Conradie, economist at NKC.
After including negotiable promissory notes in data going back to December 2001, the central bank last week also revised average annual growth in M3 during 2002 up to 20.4 percent from 17.4 percent, and in 2003, to 13 percent from 7.0 percent.
The Reserve Bank's mandate is to keep the annual increase in the targeted CPIX inflation rate between three and six percent, but it considers other indicators when setting monetary policy.
In the past, it had a guideline of six to 10 percent for growth in M3. This is no longer official, but in its quarterly bulletin, the Reserve Bank pointed out that M3 growth "remained above the 10 percent mark" throughout 2003.
The central bank said it had decided to include negotiable promissory notes in the M3 data because banks had sharply increased issues of the instruments after tax changes in 2003 made them less costly then negotiable certificates of deposit.
The market was little moved as the good credit numbers meant the signals from the data were very mixed.