Headline consumer price inflation moderated to 6.4% year-on-year in August following the July 6.7% year-on-year number. This moderation was largely due to further easing in the food component and deflation in fuel prices as a result of favourable year-on-year base effects. Inflationary pressures however remain broadly spread throughout the consumer basket, with core inflation (excluding food, non-alcoholic beverages and fuel) 2.2% above the upper band of the SARB's 3 - 6% inflation target. Second-round cost-push pressures from higher administered and service prices are also cause for concern. In addition, the favourable base effects are likely to reverse as we approach year-end. We therefore remain of the view that over the medium term inflation will continue to be sticky and average above the central bank target of 3 - 6%. The fund remains invested only in the four major banking institutions, ensuring the lowest possible risk for our investors. The average term of the portfolio is approximately 81 days.

The month of May was the 27th consecutive month that the rate of increase in the prices of consumer goods and services has been above the targeted 3 - 6% band set by the Reserve Bank. Inflationary pressures are now broadly spread throughout the CPI basket, whereas a year ago inflation was primarily being driven by food and fuel price increases. With service inflation measuring above 8% yoy, a notoriously sticky and heavily weighted component of the basket, it seems increasing likely that inflation will remain sticky. The Reserve Bank seems to have taken cognisance of the situation and at their recent monetary policy meeting elected to keep the repo rate unchanged at 7.5%. The current average term to maturity of the portfolio has increased to approximately 89 days in light of the recent Reserve Bank decision. The fund remains invested only in the four major banking institutions, ensuring the lowest possible risk for our investors.

The March inflation figure of 8.5% was an insubstantial deceleration from February's 8.6%. We remain concerned that inflation in South Africa will remain stubbornly high for longer than is currently expected due, amongst other reasons, to above 8% wage settlements and the risk of our currency depreciating further. It seems unlikely that the Reserve Bank will continually be able to ignore these pressures when considering future monetary policy easing. The current average term to maturity of the portfolio is approximately 25 days. An increase in term to maturity will be evident over the next month as we spread our fixed deposit terms to between one and three months. The fund remains invested only in the four major banking institutions, ensuring the lowest possible risk for our investors.

CPIX continued to moderate in November, slowing from 12.4 % in October to 12.1% year-on-year. This moderation was once again assisted by lower oil prices and a drop in food price growth. What is of concern is that excluding food and energy, CPIX consumer inflation measured 7.3% - indicating more broad-based inflationary pressure. Currency weakness may also present an upside risk to inflation as a significant portion of the CPIX basket is made up of imports. The current average term to maturity of the portfolio is approximately 30 days and will remain at these levels. From the beginning of November the fund has only been invested in the four major banking institutions and, at this stage, will not include any other credit instruments, ensuring the lowest possible risk for our Investors.