Reserve Bank Governor shares goods about inflation and interest rates in South Africa

South African Reserve Bank Governor Lesetja Kganyago signalled confidence that inflation would remain within its target for the next two years, despite uncertainties stemming from US tariffs. 

“Our baseline is that we think that over the next 24 months that it will remain within target,” Kganyago said in an interview with Bloomberg Television on Wednesday. “But we do caution that the outlook is clouded,” he said on the sidelines of a meeting of the Group of 20 finance ministers at a resort on South Africa’s east coast. 

South African inflation has been near or below the floor of the central bank’s monetary policy committee’s target range of 3% to 6% for eight consecutive months, but its trajectory has been muddied by US President Donald Trump’s trade war and how other nations will respond.

After delaying plans to institute steep duties on US trading partners earlier this year, Trump said he would impose them on 1 August unless bilateral trade deals can be struck. America is South Africa’s largest trading partner after China. 

The tariffs have made policymaking difficult, Kganyago said.

“You need to see a lot of data to reach a definitive conclusion,” he said. “The thing about tariffs is you also do not know how other countries react.”

Central banks, including South Africa’s, have adopted a cautious approach to the uncertainty, frequently pausing their easing cycles.   

Economists are split on whether Kganyago and his colleagues will ease interest rates or keep them steady when they release their next policy decision on July 31.