Reserve Bank Governor Lesetja Kganyago.

Johannesburg - The end of the interest-rate increase cycle in South Africa doesn’t mean that the central bank will start reducing borrowing costs, Governor Lesetja Kganyago said.

“We could be coming to the end of our hiking cycle,” Kganyago said in an interview with Bloomberg TV’s Francine Lacqua on Thursday. “That you are coming to the end of the hiking cycle does not mean that you are commencing a cutting cycle.”

The Reserve Bank’s Monetary Policy Committee has kept its benchmark rate unchanged at 7 percent since March 2016 even as inflation exceeded its 3 percent to 6 percent target band for most of last year. Forward-rate agreements, used to speculate on borrowing costs, show investors are pricing in 20 basis points of rate cuts by the end of the year even as the rand weakened after President Jacob Zuma moved to fire Pravin Gordhan as finance minister in March.

“A lot of market commentators are running ahead of themselves with respect to” forecasting rate cuts, Kganyago said from the World Economic Forum on Africa in Durban, on South Africa’s east coast.

While the rand weakened as much as 11 percent against the dollar after Zuma recalled Gordhan from investor meetings in the UK on March 27 and subsequently dismissed him in an early-morning cabinet reshuffle four days later, the currency has regained some ground to extend its advance this year to 2 percent.

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The MPC’s assumption for the exchange rate at its most recent meeting on March 30 was weaker than the current rate, Kganyago said. Inflation, which slowed to 6.1 percent in March, will fall to within the target band in this quarter and will remain there until at least 2019, the committee said then.

“The inflation outlook is not going to change as a result of the gyrations that we saw on the exchange rate” Kganyago said. There are factors which are “putting downward pressure on inflation. Food prices continue to surprise and part of it has to do with the fact that we had a very good rainfall,” he said.

S&P Global Ratings and Fitch Ratings cut South Africa’s credit assessment to junk after Gordhan’s dismissal and Moody’s Investors Service put its reading, which is at the second-lowest investment-grade level, on review for a downgrade. While the central bank said on May 2 it sees a high risk of more downgrades, Kganyago said he can’t speculate on what Moody’s will decide.

“What is important is that Moody’s has spelled out” the factors that need to addressed, he said. “We are engaging with them we don’t believe that the issues that they have raised are insurmountable.”