Comments of the Governor of the Central Bank of South Africa on the interest rate decision

Comments of the Governor of the Central Bank of South Africa on the interest rate decision

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


While economic growth is slowing globally, inflation continues to rise. Continuous policy alignment, supply shortages, and other constraints have led to a sharp increase in the prices of many goods, services, and commodities.

Increases in producer prices continue to pass into wages and consumer prices globally. Our estimate of G3 inflation has been revised to 7.0% in 2022 (from 6.9%), to 3.5% in 2023 (from 3.0%), and slightly higher at 2.1% in 2024.

Despite the decline in global food price inflation, domestic food price inflation has been revised upwards and is now expected to reach 8.1% in 2022 (up from 7.4%). Food price inflation was revised to 5.6% (down from 6.2%) in 2023 and remains unchanged at 4.2% in 2024.

The bank’s general inflation forecast for this year is unchanged at 6.5%. For 2023, the headline inflation rate has been revised to 5.3% (down from 5.7%), as a result of lower expectations for food and fuel prices and core inflation for next year.

Headline inflation is expected to reach 4.6% in 2024 (down from 4.7%).

Our forecast for core inflation is unchanged at 4.3% in 2022, and lower than previously expected at 5.4% (down from 5.6%) in 2023. The forecast for 2024 is also slightly lower at 4.8% (from 4.9%). Service price inflation is broadly unchanged.

However, commodity price inflation is expected to decline each year, largely due to lower vehicle starting point and non-alcoholic beverage inflation.

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The risk of inflation expectations is assessed to the upside. At a time when global producer prices have fallen and food prices have inflated, the Russian war in Ukraine has continued, with negative implications for global prices.

The poll’s median forecast for future inflation rose to 6.5% for 2022 and 5.9% for 2023.

Economic growth

This year, the Reserve Bank of South Africa expects the South African economy to grow by 1.9% (from 2.0%).

Growth in the first quarter of this year surprised the upside, at 1.7%. In the second quarter, flooding in Kwa-Zulu Natal and more large-scale unloading contributed to the 0.7% contraction.

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

The economy is expected to expand by 1.4% in 2023 and by 1.7% in 2024, higher than previous forecasts.

With the rate of potential lower, our current growth forecast leaves the production gap broadly unchanged. The production gap is still expected to turn positive in the second quarter of 2023.


Against this background, the MPC decided to increase the repo rate by 75 basis points to 6.25% annually, effective September 23, 2022.

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

The level of the repo rate is now closer to the level prevailing before the onset of the pandemic.

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

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The policy aims to hold inflation expectations more firmly around the middle of the target range and to increase confidence that the inflation target will be reached in 2024.

Directing inflation toward the midpoint of the target range can reduce the economic costs of high inflation and enable lower interest rates in the future.

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