South African central bank Governor Lesetja Kganyago promised that officials will lower the inflation rate back to its 3% target despite headwinds from the Iran war.
“Let there be no doubt, the South African Reserve Bank will be getting inflation back down to 3%,” he said in remarks prepared for delivery to a conference hosted by the Bureau for Economic Research on Tuesday in Johannesburg. “I hope our history of delivering on our targets makes that promise convincing.”
Kganyago and his colleagues last week raised borrowing costs by 25 basis points to 7%, delivering the first rate increase in three years as inflationary pressures intensified after the start of Iran war. They also signaled that further tightening may be warranted if the conflict drags on.
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“Last week’s rate hike should help,” he said. “I cannot tell you now if more will be needed, or how much. We take our decisions meeting by meeting. But the policy objective should be crystal clear.”
Inflation has drifted away from the central bank’s 3% target since the war began on February 28, driven by a surge in energy prices, and is projected to reach 4.9% as early as the third quarter this year, according to the bank’s latest forecasts.
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