“We would prefer that inflation expectations are closer to 4.5%,” Kganyago said in an interview with Bloomberg Television in
Washington. “That will build a cushion for South Africa because there
are risks on the horizon.”
The bank’s inflation forecast for the next 18 to 24 months is about 5%, “not quite where we would like it to be but within our target
band,” he said. The central bank shoots for inflation of 3% to 6%.
Policy makers in Africa’s most-industrialised nation are overseeing a pickup in
economic growth and a
slowdown in price increases, with the annual inflation rate falling to 3.8% in March.
That combination may soon come to an end as price gains are expected
to accelerate, Kganyago said. According to a model used by monetary
policy makers, the gap between actual and potential economic output is
quickly closing, he said, adding that’s not good for the inflation
outlook.
The Monetary Policy Committee last month cut the repurchase rate by a
quarter percentage point to 6.5%, the lowest level in two years.
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