IMF pats SARB on the back

A spokeswoman for the International Monetary Fund, which is based in Washington, said Thursday that the lender welcomed the South African central bank’s efforts to rein in consumer price growth.

Headline inflation returned to within the South African Reserve Bank’s 3% to 6% target range in 2023 thanks to “decisive” monetary policy tightening, Julie Kozack told reporters in Washington. “We have seen some very welcome progress,” she said.

The central bank held its benchmark interest rate steady last week at a 15-year high of 8.25%, warning that while price pressures have moderated in recent months, they are still too high.

The decision had been widely anticipated, with economists expecting the central bank to keep a low profile when it delivered its verdict one day after South Africans voted on May 29.

South Africa’s inflation rate fell for a second straight month to 5.2% in April. However, the central bank is focused on returning it to the midpoint of its 3% to 6% target range, where it prefers to anchor expectations.

For the first time since taking power in 1994, the African National Congress failed to win a majority of votes in the election.

It will need to bring in other parties to form a government, raising uncertainties about what policy changes this could bring.

The authorities must remove bottlenecks to growth through an ambitious structural reform agenda, Kozack said.

The new government must also put public debt on a sustained downward path through a fiscal consolidation, she said.