Kganyago sticks with hawkish tone on inflation

‘We have got to be seeing that consecutively, inflation is sustainably closer to the 4.5% that we aim for.’
South African Reserve Bank Governor Lesetja Kganyago. Image: Bloomberg

South African Reserve Bank Governor Lesetja Kganyago acknowledged that inflation has eased, but stressed it was premature to declare victory in the battle to contain price pressures.

“We have got to be seeing that consecutively, inflation is sustainably closer to the 4.5% that we aim for,” he said Thursday during a television interview with Newzroom Afrika. “Then we would know that we have actually conquered this monster called inflation.”


Read: Rates are getting real

The South African central bank held its benchmark interest rate unchanged at 8.25% on September 21, while stressing that it remained on alert against inflation.

“It is closer to where we would like to see it,” he said on Thursday. “Inflation has declined. But the job is not yet done.”

Read: The answer to SA’s predicament is complete state reform

The central bank prefers to anchor inflation expectations close to the midpoint of its target range of 3% to 6%. Annual inflation in August quickened for the first time in five months to 4.8% from 4.7% in July, signaling that price pressures are still lingering.

Data dependent

“We are guided by data. We will look at the data that’s come since our previous meeting,” Kganyago said when asked if the monetary policy committee will hold rates again in November.

He noted the risks to the inflation outlook include oil and food prices, as well as the value of the rand on foreign-exchange markets, which has weakened more than 10% against the dollar so far this year as the US central bank raised rates.

“Global financial conditions remain tight and with global financial conditions being tight, capital flows to where it can get the best returns,” he said, adding that the rate differential advantage enjoyed by emerging markets has narrowed as monetary policy in advanced economies was tightened.

In forecasts updated last month, the central bank expects inflation to average 5.9% this year down from a prior estimate of 6%, slowing to an average of 5.1% in 2024. It sees the South African economy growing 0.7% this year, up from a previous forecast of 0.4%, as ongoing power cuts and logistical constraints continue to hamper activity.

Read: Godongwana rebuffs ruling party call to pressure Sarb

“Inflation is eating the income of South Africans the central bank has to be vigilant to that,” Kganyago said. “We do not take pleasure at South Africans being in pain because interest rates are elevated.”


South Africa’s gloomy economic outlook is also being darkened by the government’s poor public finances. Finance Minister Enoch Godongwana is expected to warn of a widening budget deficit and declining revenues when he presents a review of South Africa’s fiscal position on November 1.

Independence tested

At a later event in Johannesburg, Kganyago defended the reserve bank’s independence, noting that its mandate for stable prices is enshrined in the South African constitution.

Read: Sarb warns ANC over spending risks

During his current tenure, which ends in November 2024, the central bank has faced calls to soften its policy stance from members of the ruling African National Congress, which opinion polls show could lose its majority during next year’s election.

The governor said his message to anyone calling for the central bank to tack a different tack was simple: “Go change the constitution.”

Read: Too soon to celebrate the drop in inflation

He was also asked if he was interested in staying in the job for a third term. His answer left everything on the table.

“I am a servant of my people,” he said, adding he would “consider it if it is raised with me.”

© 2023 Bloomberg


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Trying to constrain inflation when the ZAR is being battered by hard currencies, is pointless and is a band aid on a gaping wound. A very unreliable power supply, monumental levels of unemployment/crime, a now very fragile water supply and to add insult to injury, a self serving government, is the greater cause of our prolonged financial (and moral) malaise. Our inflation is imported (think Brent Crude oil price etc.) and SARB intervention by interest rate hikes and the like, just adds to the problem for those below the bread line and the general working class. I am not suggesting that Mr. E. G. try to iron out the multitude of problems outlined above, but surely he and the other Ministers and their subordinates can get around a table and forge something of real consequence, without another Board of Enquiry, 5 year test case scenario. The Round Table exercise should be for the benefit us ordinary mean and women keeping our government in power and providing their paycheques & many perks. No consultants required or more pointless speeches by our President please for the love of humanity!!! Simple enough, but that was the case 30 years or so and I am pretty sure that those that are honest enough, know how that went…

SA is rudderless and stuck in a serious debt spiral, with ten of millions of hungry mouths to feed. A very precarious situation to say the least. Our economy has been crying out for real reform for decades, but Ramaphosa and his cohorts just let everything go to pot. At this rate, its guaranteed that the economy will find itself in a far worse off position in a decade from now. The only thing our politicians seems to know how to do is draw fat salaries, issue themselves government tenders. There is no real leadership in the country. There is no serious attempt at solving the country’s deep seated problems. The value of our hopeless Rand reflects that.

End of comments.



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