South Africa’s inflation well contained

MFUNEKO TOYANA AND ALEXANDER WINNINGSouth African financial markets are unlikely to be severely disrupted as global central banks normalise policy, and a balanced inflation outlook means domestic interest rates can stay low, Governor Lesetja Kganyago said on Thursday.Kganyago told Reuters in an interview that even if capital outflows did materialise as other central banks taper asset purchases or raise rates, the South African Reserve Bank's focus was on inflation."Our inflation is contained. Monetary policy will not come with a stance that tries to stem capital outflows. For as long as inflation on a forward-looking basis is contained, there's no need to adjust policy," he said.Consumer inflation collapsed to as low as 2.1% last year as the Covid-19 pandemic shuttered most businesses, and it has only risen gradually since.In February, the latest month for which price data are available, inflation was at 2.9% year on year, below the central bank's target range of 3% to 6%.The central bank of Africa's most industrialised nation slashed lending rates by 300 basis points to a record low of 3.5% in 2020 to soften the impact of Covid-19, but it has kept them on hold at its last four policy meetings.Emerging marketsCentral banks in other emerging markets like Turkey, Russia and Brazil have recently raised lending rates, partly to fight higher inflation.There are indications that the US Federal Reserve and other developed market central banks are moving closer to a point where they could tighten policy.Kganyago said he believed the high yield on South African bonds would keep investors interested.The yield on the benchmark 2030 government bond spiked as high as 13% when the pandemic reached South Africa, but it has since eased back to around 9%."Foreign investors are well-rewarded in South Africa at the moment. Our bond yields are significantly higher than bond yields in the advanced economies, and we are higher than many emerging market economies in real terms," he said.The Reserve Bank launched a bond-buying programme in response to the pandemic, purchasing government debt in the secondary market. - Nampa/Reuters

South Africa’s inflation well contained

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Republikein 2026-06-10

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South Africa’s inflation well contained

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