Thursday, September 29, 2022
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South Africa's central bank governor's comments on interest rate decision

JOHANNESBURG (Reuters) – Here are some quotes from South African Reserve Bank Governor Lesetja Kganyago when he announced the central bank’s latest interest rate decision on Thursday.


Inflation continued to unexpectedly rise despite slowing global growth. Continued policy easing, supply shortages and other restrictions have sent prices for many goods, services and commodities sharply higher.

The rise in producer prices continues to pass through to global wages and consumer prices. Our G3 inflation estimate was revised up to 7.0% (from 6.9%) at 2023, 3.5% (from 3.0%) at 2023, and 2024 slightly higher to 2.1%.

While global food price inflation has declined, local food price inflation has been revised up and is now forecast at 8.1% in 25 (from 7.4% increase). Food price inflation in 2023 was revised down to 5.6% (down from 6.2%) and unchanged at 4.2% in 2024.

The central bank’s forecast for headline inflation this year remains unchanged at 6.5%. For 2023, headline inflation was revised down to 5.3% from 5.7% due to lower forecasts for next year’s food, fuel and core inflation.

2022 Headline inflation is projected at 4.6% (down from 4.7%).

Our forecast for 25 core inflation remains unchanged at 4.3%, down from the previous forecast of

5.4% (down from 5.6%) %) . 2024 forecast was also slightly lower at 4.8% (from 4.9%). Service price inflation remained largely unchanged.

However, core commodity price inflation is expected to decline each year, largely due to lower starting points for auto and non-alcoholic beverage inflation.

Risks to the inflation outlook are assessed to the upside. While global producer prices and food inflation have eased, Russia’s war in Ukraine continues, adversely affecting global prices.

Average survey expectations for future inflation have risen to 6.5% 2022 and 5.9% 2023.

Economic Growth

The South African Reserve Bank expects the South African economy to grow by 1.9% this year, (was 2.0%).

Growth in the first quarter of the year was a surprising 1.7%. Flooding and broader load shedding in KwaZulu-Natal led to a contraction of 0.7% in the second quarter.

Growth rates are expected to be 0.4% and 0.3% in the third and fourth quarters, respectively.


economic growth of 1.4% and 2024 1.7%, higher than the previous forecast.

Our current growth forecast leaves the output gap largely unchanged due to lower potential growth rates. The output gap is still expected to turn positive in the second quarter.


Against this background, MPC decided to increase the repo rate by 75 basis points to 6 basis points . 25% Annually, effective from September 25 25 ).

Three members of the committee favored the announced increase. Two members favored a 100 basis point increase.

Repo rate levels are now closer to pre-pandemic levels.

The revised repo rate path remains supportive of credit demand in the near term, while raising rates to levels more consistent with current inflation risk views.

The purpose of policy is to anchor inflation expectations more firmly around the midpoint of the target range, increasing confidence in achieving the inflation target 2024.

Guiding inflation back to the midpoint of the target range reduces the economic costs of high inflation and lowers interest rates in the future.



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