Kganyago: SA inflation may have peaked

South Africa’s inflation rate likely peaked in the third quarter, but must move closer to the midpoint of the central bank’s target range before the monetary authority can declare victory in the battle to rein in price growth, Governor Lesetja Kganyago has said.

Inflation accelerated to the highest in more than 13 years in July, when it reached 7.8% year-on-year. The annual rate has fallen for two consecutive months since then, though it remains well above the midpoint of the 3%-to-6% target range at which the monetary policy committee prefers to anchor inflation expectations.

“We might have reached the peak in the third quarter,” Kganyago told reporters at a lunch event in Johannesburg.

“We need to see that decline firmly into the inflation target, closer to the midpoint of the inflation target range. Then we know that we can declare victory over the monster of inflation.”

South African policymakers have raised the benchmark interest rate by a cumulative 275 basis points since November to 6.25% to rein in inflation. The implied policy rate path of the central bank’s quarterly projection model, which the MPC uses as a guide, indicated in September the benchmark will be at 6.76% by the end of 2024.

The model shows that inflation probably peaked in the third quarter of this year and will only stabilise close to the midpoint of the bank’s target range in 2024.

The MPC is scheduled to announce its final interest-rate decision of this year on 24 November. – bloomberg