Kganyago: Reserve Bank must focus on slowing CPI to its 4.5% target

South Africa 's central bank must restore faith in its ability to achieve its inflation target after struggling to slow consumer price growth to 4.5% for about three years, Governor Lesetja Kganyago said.

The Reserve Bank officially targets inflation in a range of 3% to 6%, but its monetary policy committee prefers to anchor price-growth expectations close to the midpoint. The annual inflation rate was After the worst global inflation shock in a generation, headline price growth returned to the central bank's target band in June 2023"but has since then been stuck in the top half of that range, making no clear progress towards our 4.5% midpoint objective," Kganyago said in a message in the central bank's annual report published Tuesday."It is important that we rebuild confidence in our ability to achieve our target," he said.

The central bank sees inflation averaging 5.1% this year and stabilising at 4.5% in the second quarter of 2025. South Africa'sare 5.4% for this year and 5.3% next year, according to the latest survey of analysts, businesspeople, labour unions and households conducted by the Stellenbosch-based Bureau for Economic Research. The MPC has been holding the benchmark interest rate at 8.25%, a level it considers restrictive, to achieve its target, Kganyago said.

While the central bank's quarterly projection model, which the MPC uses as a guide, shows borrowing costs easing this year as inflation slows, upside risks to the forecast - including higher interest rates in advanced economies, and less stable inflation expectations - are prompting policymakers to keep the key rate on hold, the governor said.

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