Cape Town - Inflation in South Africa remains “highly persistent” although pressures have
been contained by weak demand and a relatively strong rand, Finance Minister
Pravin Gordhan said on Monday.
“A key challenge is to reduce the volatility of inflation
expectations and to make them more forward-looking,” Gordhan said in a written
response to questions asked in parliament.
Analysts expect the Reserve Bank to keep interest rates steady on
Thursday despite concerns about sluggish economic growth, as higher food costs
help push inflation steadily towards the top end of a 3% to 6% target band.
Latest data show the consumer price index (CPI) quickened to 5.3% year-on-year (y/y) in July
and the central bank has said it expects a breach of the target by year-end. The
August CPI data will be released on Wednesday and are expected at 5.5% y/y.
On Monday, Gordhan said progress had been made in attaining the
inflation target and significant improvements made from previous governments in
making the Reserve Bank more accountable for its actions and increasing the
transparency and predictability of monetary policy.
“Despite these improvements, inflation remains heavily influenced
by past inflation developments in South Africa, that is, it is highly
persistent,” Gordhan said.
“Credible and forward-looking monetary policy can help keep
inflation low and reduce the volatility of expectations.”