Kganyago committed to bringing inflation to target

Governor Lesetja Kganyago said South Africa’s central bank must restore faith in its ability to achieve its inflation target after struggling to slow consumer price growth to 4.5% for about three years. 

The Reserve Bank officially targets inflation in a range of 3% to 6%, but its monetary policy committee prefers to anchor price-growth expectations close to the midpoint.

The annual inflation rate was 5.2% in May, unchanged from the previous month. 

After the worst global inflation shock in a generation, headline price growth returned to the central bank’s target band in June 2023 “but has since then been stuck in the top half of that range, making no clear progress towards our 4.5% midpoint objective,” Kganyago said in a message in the central bank’s annual report published Tuesday.

“It is important that we rebuild confidence in our ability to achieve our target,” he said. 

The central bank sees inflation averaging 5.1% this year and stabilizing at 4.5% in the second quarter of 2025. According to the latest survey of analysts, businesspeople, labor unions, and households conducted by the Stellenbosch-based Bureau for Economic Research, South Africa’s average inflation expectations are 5.4% for this year and 5.3% next year.  

Upside risks

Kganyago said the MPC has been holding the benchmark interest rate at 8.25%, a level it considers restrictive, to achieve its target. 

While the central bank’s quarterly projection model, which the MPC uses as a guide, shows borrowing costs easing this year as inflation slows, upside risks to the forecast – including higher interest rates in advanced economies and less stable inflation expectations – are prompting policymakers to keep the key rate on hold, the governor said. 

Despite South Africa’s “relatively benign” recent inflation performance compared with advanced and emerging market economies, it is likely to have the third-worst inflation rate among the Group of 20 nations from 2026, Kganyago said, citing International Monetary Fund forecasts.

That’s as the country’s inflation goal of 4.5% is high relative to its peers and weighs on competitiveness, he said.

In February, South Africa’s National Treasury said there’s a case to be made for the inflation target to be reviewed to improve competitiveness and offset the adverse impact price growth has on the poor.

“South Africa can and should have lower inflation,” said Kganyago, who has long advocated for a reduced target.     


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