Kganyago: South Africa's battle against inflation not yet over despite global policy shifts

South African Reserve Bank chief Lesetja Kganyago says inflation still poses risk even as other emerging markets start to loosen policy.

In an interview with the Financial Times, Kganyago said that despite signals from central banks elsewhere suggesting a decline in inflationary pressures, South Africa's “job of taming inflation is not yet done”.

While countries like Chile and Brazil have accelerated rate cuts, others like the Philippines and India have hesitated, citing concerns about potential inflationary pressures stemming from trade disruptions in the Red Sea.

South Africa, which has maintained its rates in recent meetings after a series of increases starting from late 2021, is awaiting further data indicating a movement of inflation towards the middle of its official target range of 3% to 6% before making any policy changes, Kganyago noted.

Inflation in South Africa — currently at 5.1% — had previously seemed to be falling, only to rise again, he said, adding: “The arrival of one swallow does not make a summer.”

The Reserve Bank governor highlighted the structural challenges facing South Africa's economy, including power blackouts and disruptions in port and rail services, which have hindered growth. He pointed out that the growth challenges are primarily on the supply side rather than the demand side.

Discussions, meanwhile, continue between the central bank and the treasury regarding the utilisation of government gold and foreign exchange reserves, which have grown significantly due to currency depreciation.

However, any potential transfer would need to safeguard the central bank's operational independence.