Kganyago flags geopolitical risks as Reserve Bank maintains cautious stance

Reserve Bank Governor Lesetja Kganyago has warned of mounting geopolitical risks to the domestic economy as the central bank maintains a cautious approach to monetary policy.

READ: Steady domestic growth offers shield against global volatility, says Reserve Bank Governor

The Reserve Bank’s Monetary Policy Committee (MPC) kept the repo rate unchanged at 6.75% during today’s highly anticipated announcement. This marks the first MPC meeting of the year and the second since Governor Kganyago and Finance Minister Enoch Godongwana endorsed a lower 3% inflation target.

While December’s inflation rate of 3.6% was slightly higher than anticipated due to temporary factors, Kganyago noted that the bank expects price growth to slow moving forward.

“More positively, inflation expectations have fallen, with the latest survey showing longer-term expectations at record lows,” Kganyago stated. “We look forward to expectations declining further, as South Africans experience ongoing lower inflation and learn more about the new target.”

Despite the optimistic local data, the Governor emphasised that global uncertainty remains a primary risk factor for the South African economy. As a result, the MPC is not committing to a fixed path for future interest rate adjustments.

“Our decisions will continue to be taken on a meeting-by-meeting basis,” said Kganyago. “We will pay careful attention to the outlook, data outcomes, and the balance of risks to the forecast.”