MAINTAINING low and stable inflation is the
most effective way for the central bank to help the economy, South
African Reserve Bank governor Lesetja Kganyago says.
His comments pushed the rand firmer on Wednesday.
The economy has been hit by a ravaging drought, and its economic prospects do not look promising, Kganyago said at a conference.
He said the Reserve Bank was committed to containing inflation, although its current monetary policy tightening cycle was one of the most gradual on record.
The bank has gradually raised interest rates by a cumulative 200 basis points since July 2014, as it fights price pressures while at the same time protecting the ailing economy.
At its last policy meeting in May, the Bank cut its 2016 growth forecast to 0.6% as it left the benchmark repo rate unchanged at 7%. Inflation stood at 6.2% in April.
"The South African Reserve Bank is certain that an environment of consistently low and stable inflation is the best contribution it can make to a balanced and sustainable growth (outlook)," Kganyago said.
Recent shocks to growth and inflation had created "a great deal of uncertainty", he said.
Inflation is expected to persist above the top end of a 3%-6% target band until late next year, he said.
"In this context, at least, you can be certain that the South African Reserve Bank is committed to containing inflation," Kganyago added.
The rand extended its gains, up 0.6% after Kganyago’s comments, and traded 0.42% firmer at 15.6400 to the dollar by 8.51am GMT.
Kganyago’s comments come days before Standard and Poor’s, which ranks SA just one step above subinvestment grade, is due to make public its rating decision on Friday.
Reuters
His comments pushed the rand firmer on Wednesday.
The economy has been hit by a ravaging drought, and its economic prospects do not look promising, Kganyago said at a conference.
He said the Reserve Bank was committed to containing inflation, although its current monetary policy tightening cycle was one of the most gradual on record.
The bank has gradually raised interest rates by a cumulative 200 basis points since July 2014, as it fights price pressures while at the same time protecting the ailing economy.
At its last policy meeting in May, the Bank cut its 2016 growth forecast to 0.6% as it left the benchmark repo rate unchanged at 7%. Inflation stood at 6.2% in April.
"The South African Reserve Bank is certain that an environment of consistently low and stable inflation is the best contribution it can make to a balanced and sustainable growth (outlook)," Kganyago said.
Recent shocks to growth and inflation had created "a great deal of uncertainty", he said.
Inflation is expected to persist above the top end of a 3%-6% target band until late next year, he said.
"In this context, at least, you can be certain that the South African Reserve Bank is committed to containing inflation," Kganyago added.
The rand extended its gains, up 0.6% after Kganyago’s comments, and traded 0.42% firmer at 15.6400 to the dollar by 8.51am GMT.
Kganyago’s comments come days before Standard and Poor’s, which ranks SA just one step above subinvestment grade, is due to make public its rating decision on Friday.
Reuters
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