South African Central Bank Governor Lesetja Kganyago
Waldo Swigers/Bloomberg/Getty Images
South African Reserve Bank Governor Lesetja Kganyago said he and other monetary policymakers remain committed to their mandate to ensure price stability despite the political uncertainty created by last week's elections.
“No matter how post-election politics play out, no matter what the results are over the next two weeks, we will continue to fulfil that mandate,” he told an audience at Soweto Theatre in southwest Johannesburg on Tuesday. “We will remain accountable to Parliament and we will continue to work for the economic upliftment of all South Africans.”
The African National Congress lost its parliamentary majority in elections on May 29 for the first time since it came to power in 1994 and is now negotiating a power-sharing agreement with smaller rival parties.
Possible combinations include a coalition with the centrist Democratic Alliance or an alliance with former ANC president Jacob Zuma's left-wing Economic Freedom Fighters Umkhonto weSizwe party.
The talks must be concluded within two weeks of the announcement of the election results on Sunday.
“The only impact will be what policies the coalition government puts forward and whether those policies are sustainable,” Kganyago said. “If the policies are not sustainable, the investments may not be made. If they are sustainable, then we will be talking about a different future.”
The central bank last week kept interest rates on hold at a 15-year high of 8.25%, warning that inflationary pressures have eased in recent months but remain too high. The decision was widely expected and the central bank made the decision the day after South Africa's referendum, but economists had expected the bank to keep a low profile.
South Africa's inflation rate fell for a second straight month in April to 5.2%, but the central bank is focused on getting inflation back to the midpoint of its target range of 3% to 6%, where it wants to anchor expectations.
Acknowledging the recent improvement, officials revised their May 30 policy statement to say inflation risks are now broadly balanced, a shift from March, when they saw risks leaning to the upside. Officials also revised their March forecast for price pressures to stabilize at 4.5% in the second quarter of next year, up from the end of 2025.
But officials noted that the task of hitting the inflation target is not over, and were careful not to appear to be leaning in a more dovish direction that would suggest a rate cut is imminent.
Finance Minister Kganyago struck a similar tone in Soweto, saying officials expect price pressures to ease towards 4.5 percent in the first half of next year but warned that “it is likely to be a difficult and bumpy journey to get there”.
