The things keeping the SARB governor up at night

South Africa’s central bank has more work to do to rein in inflation that remains elevated, with higher food and oil costs posing risks to the outlook for price growth, central bank Governor Lesetja Kganyago said.

“The job on the inflation front is not yet done,” he told Francine Lacqua in a Bloomberg Television interview on Wednesday in Marrakech, where the International Monetary Fund and World Bank are holding their annual meetings.

“We remain vigilant, and we stand ready to deploy our tools as necessary.” 

Kganyago has consistently hewed to a hawkish line on price pressures, warning of potential risks that could push it higher, including a weaker rand and rising oil prices.

South Africa is also in the midst of an outbreak of avian flu that risks pushing up prices of chicken – an important source of animal protein in the country.

South Africa’s central bank held interest rates at 8.25% on 21 September while leaving the door open to more tightening to curb inflation if needed. The monetary policy committee will deliver its next rate decision on 23 November.

Annual inflation in South Africa was 4.8% in August, near the midpoint of the central bank’s preferred target range of 3% to 6%. The rate has declined from a peak of 7.8% in July, which was the highest since 2009.

“We would still want to see a number of readings that would suggest that inflation has declined sustainably toward our target,” Kganyago said.

In forecasts updated last month, the central bank expects inflation to average 5.9% this year, down from a prior estimate of 6%, slowing to an average of 5.1% in 2024.

Read: South Africa can expect another interest rate hike in 2023, say economists