Johannesburg - South Africa’s central bank can’t yet call
the end of its interest rate-increase cycle, even as the risks to inflation
have eased since the Monetary Policy Committee’s January meeting, Governor
Lesetja Kganyago said.
“It’s too early for me to make the call as to whether we
are still on the tightening cycle or not,” Kganyago said in an interview with
Bloomberg Television’s Jonathan Ferro. “We can’t say that” the increase cycle
is now over.
Kganyago said in November the MPC may be close to the end
of the tightening cycle in which it raised the benchmark lending rate by 200
basis points over two years to 7 percent by last March. This was in bid to
bring price growth back to within the government’s target band after being outside
it for most of last year as a drought raised food prices and the rand reached
record lows.
The MPC, which will announce its next policy move on
March 30, targets inflation between 3 percent and 6 percent.
Read also: Interest rates kept stable
Price growth eased to 6.6 percent in January, the first
slowdown in five months, and five-year breakeven rates, a measure of inflation
expectations, fell to the lowest since April 2015 on Friday. Oil and food price
still pose risks, Kganyago said.
The risks to inflation have “definitely been mitigated
compared to the previous policy-setting meeting,” he said. “Clearly, the
recovery of the currency helps, but the rise in oil prices doesn’t help.
Clearly the good rains help and the price of grains will come down, that helps,
but that farmers are restocking their herds and meat prices remain high,
doesn’t help.”
The rand was little change at 12.7712 per dollar by 3:02
p.m. in Johannesburg on Friday. Yields on rand-denominated bonds due December
2026 fell two basis points to 8.52 percent.
Economic growth in Africa’s most industrialized nation
slumped to 0.3 percent for 2016, lower than government and central bank
estimates, and the slowest rate since a recession seven years earlier
The central bank forecasts the economy will expand 1.1
percent this year, and 1.6 percent in 2018. There is still significant downside
to growth, Kganyago said.