Rand Gains Offer South Africa’s Kganyago ‘Cushion’ on Rates
The recent strength of South Africa’s rand is providing a cushion for the country’s policy makers and shouldn’t lead to complacency in tackling inflation, Reserve Bank Governor Lesetja Kganyago said.
“The risks to the inflation outlook has to do with possible future weakness in the currency,” Kganyago told reporters at a central bank event in Pretoria on Thursday. “The fact that the currency has strengthened has not taken that way, it has just provided us with a cushion over a period of time, we do not know for how long.”
Slower inflation may give the central bank the opportunity to halt an interest-rate increase cycle and support an economy that it estimates won’t expand this year. Policy makers have been caught in a dilemma of weak growth and inflation outside its 3 percent to 6 percent target. The rand has appreciated 15 percent against the dollar in 2016 and more than 12 percent versus the euro.
“It’s a function of how sustained” the rand’s gains would be, Mminele said. ”This may well just be a period of correction.”