In a webinar held on Thursday, South Africa’s central bank Governor Lesetja Kganyago delivered a clear message – the South African Reserve Bank (SARB) will not intervene to bolster the ailing rand. Kganyago asserted that the rand’s recent decline is part of a broader global currency realignment, and defending it would be an exercise in futility.
“The attempt to defend the exchange rate is futile,” Kganyago emphasized.
This year, the South African rand has weakened by approximately 13% against the US dollar, raising concerns about its stability and economic implications. Despite this, Kganyago reiterated that the SARB’s primary focus remains on curbing inflation. He highlighted that inflationary pressures come from various sources, including food and oil prices, as well as fluctuations in exchange rates.
August saw South Africa’s consumer inflation inch up to 4.8% year-on-year, a modest increase from July’s 4.7%. Nevertheless, it comfortably resides within the central bank’s target range of 3% to 6%.
During its last meeting in September, the SARB opted to maintain its main lending rate at 8.25%. Kganyago, however, refrained from indicating any imminent interest rate cuts. Instead, he suggested a cautious approach, stating, “I wouldn’t describe inflation as volatile, but it might persist at higher levels for longer than expected.”
The SARB’s final monetary policy committee meeting for the year is scheduled for November. Investors and economists will closely watch this meeting for any insights into the central bank’s strategies regarding interest rates and its stance on inflation management.
Photo: South African Reserve Bank Governor Kganyago/ Source: Siphiwe Sibeko/Reuters
By: Montel Kamau
Serrari Financial Analyst
5th October, 2023
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