Kganyago has good news for South Africa

South Africa’s central bank Governor Lesetja Kganyago says that lower oil prices have helped drive inflation in the country to a multiyear low and would probably continue to do so.

“We still think that the next print might still have a 2-handle to it, but the environment is uncertain,” Kganyago told Bloomberg Television Thursday in Washington, on the sidelines of the International Monetary Fund and World Bank Spring Meetings.

“Although the South African rand has depreciated, what we’ve found is that the decline in the oil price more than made up for the depreciation of the currency.”

The South African Reserve Bank’s monetary policy committee last month left rates unchanged at 7.5% after three successive 25 basis point cuts.

Economists are split on whether the MPC will cut or continue to pause when it delivers its next rate decision on May 29.

That’s after inflation cooled to 2.7% last month from 3.2% in February, the lowest level since June 2020 and amid concerns over the impact of US President Donald Trump’s tariffs.

Last week, Kganyago said confidence about global economic developments had eroded since October and warned that heightened uncertainty will lead to interest rates remaining higher for longer, while the central bank assessed its current policy stance to be neutral.

The MPC at its March meeting cut its inflation forecast for 2025 to 3.6% from 3.9% and its outlook for growth to 1.7% from 1.8%, citing concerns about weaker demand and fragile supply chains.

On Tuesday, the IMF slashed its growth forecast for South Africa to 1% from 1.5%, blaming increased uncertainty, escalating protectionist policies and a slowdown in major economies.