South Africa needs to sustain a low inflation rate to justify a change in the central bank’s monetary policy stance, Governor Lesetja Kganyago said. Consumer-price growth was 4.6% in July, the lowest level in three years.
That took the spread between the South African Reserve Bank’s policy benchmark and the annual inflation rate to an 18-year high and fuelled bets that the central bank’s monetary policy committee will start its interest-rate cutting cycle when it meets on September 19.
Forward-rate agreements – used to speculate on borrowing costs – are fully pricing in a 25 basis-point reduction in the key rate this month.
While the latest inflation data is welcome, it reflects historic price changes, Kganyago said in an interview with state-owned SAfm radio on Monday. "What South Africa needs is not just lower inflation, but sustained low inflation," he said.
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