Politics is complicating efforts by South Africa\u2019s central bank to set monetary policy and keep inflation under control, according to Reserve Bank Governor Lesetja Kganyago.<\/p>\n
\u201cOur job is already difficult,\u201d Kganyago said in an interview with Bloomberg TV in London. \u201cWhat the politics does is that it just adds to the complexity.\u201d<\/p>\n
Uncertainty has prevailed for more than a year over who will replace President Jacob Zuma as leader of the ruling African National Congress in December. The contest is widely seen as a two-horse race between Deputy President Cyril Ramaphosa and Nkosazana Dlamini-Zuma, the president\u2019s ex-wife and former chairwoman of the African Union Commission.<\/p>\n
The central bank hasn\u2019t been spared in the political infighting that accompanied the succession race, with the nation\u2019s anti-graft ombudsman instructing lawmakers in June to change the constitution to make the bank focus on the \u201csocioeconomic well-being of the citizens\u201d rather than inflation. The High Court has set this order aside, after the central bank sought a review of her directive.<\/p>\n
\u201cThe problem with the South African discourse on the central bank is that it is based on rhetoric and it is based on populism, rather than looking at the hard facts,\u201d Kganyago said.<\/p>\n
\u201cWhat we didn\u2019t anticipate is that the question about the mandate of the central bank will come from an institution such as the office of the Public Protector. That took us by surprise and we had to push back. We believed what we were saying and what we were doing was simply implementing what the constitution of the Republic of South Africa demands of us.\u201d<\/p>\n
Inflation Expectations<\/strong><\/p>\n The central bank kept its benchmark lending rate unchanged at 6.75% on Sept. 21, citing concerns about about higher inflation expectations. Only four of the 24 economists surveyed by Bloomberg predicted the unchanged stance, while the rest expected a cut.<\/p>\n Kganyago dismissed analysts\u2019 suggestions that the bank had missed an opportunity to lower rates, saying its focus is to keep inflation within the target range.<\/p>\n \u201cIt doesn\u2019t follow that we must change the monetary stance at every meeting,\u201d he said. \u201cWe deemed it prudent to keep the rates the same.\u201d<\/p>\n The bank has identified the rand as a key risk to inflation, which has remained within its 3% to 6% target band for the past five months. The currency weakened to a five-month low against the dollar on Thursday, as President Donald Trump\u2019s plans to slash corporate taxes buoyed demand for US assets.<\/p>\n The central bank expects the exchange rate to remain volatile as long as uncertainty persists, according to Kganyago. The bank hasn\u2019t undertaken to support the currency, only to protect its value, he said.<\/p>\n \u201cProtecting the value of the currency is what the currency buys at home, not what it buys in New York or what it buys in London,\u201d he said.<\/p>\n
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