South Africa cautious on rates to avoid regrets, Kganyago says
South African Reserve Bank Governor Lesetja Kganyago said policymakers were proceeding with care on adjusting interest rates, to avoid having any future regrets.
“In an environment of uncertainty it is very important for the central bank to move with caution and not add to the noise that you have in the data,” Kganyago said in an interview on CNBC Africa broadcast Monday. “We believe that the policy adjustments that we have done were the appropriate ones.”
The central bank last month lowered its key interest rate by 25 basis points to 7.75%, even as some analysts called for a bigger cut after South Africa’s annual pace of inflation cooled by more than expected to 2.8% in October.
The rand, a bellwether for emerging market currencies, has depreciated almost 3% against the dollar since Donald Trump won the US election on November 5.
Investors are betting that his policies on tariffs and tax cuts may see the Federal Reserve lower rates by less than forecast. That could keep the US currency strong, which is bad news for South Africa as it makes its imports more expensive, adding to domestic price pressures.
“There are so many moving parts and we are not clear about what is going to happen to the global economy as a result of changes in policies that we are not even aware of,” Kganyago said.
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