South Africa faces bad news as interest rates rises

South Africa interest rates will only cease if inflation remains below the midpoint of the central bank’s target range, according to Reserve Bank Governor Lesetja Kganyago.

The bank’s official target range for price growth is 3% to 6%, but its monetary policy committee prefers to anchor inflation expectations near the middle of that range.

According to the central bank’s six-monthly Momentary Policy Review published on October 4, rising costs and domestic price pressure that have “intensified sharply” in an environment of increased uncertainty suggests policy makers may still need to increase rates to “level consistent with a stable and lower inflation rate.”

Speaking to a Johannesburg-based broadcaster eNCA Tuesday in an interview, Kganyogo said, “once you see inflation declining back within the target and moving toward 4.5%, which is what we actually aim for, that would be telling you that the interest rate cycle has done its job,”

The main sources of inflation in September were food and transportation. Core inflation, which excludes volatile items such as food and fuel, rose to 4.7% from 4.4%, indicating that underlying price pressure are increasing.

This demonstrates that the committee is committed to combating inflation, and there may be room to reduce the hiking cycle.

Main Image:Business Recorder