South African Reserve Bank Governor Lesetja Kganyago said there would be no interest-rate cuts until inflation is brought under control, remaining resolute despite calls for him to do so ahead of national elections.<\/p>\n\n\n\n
\u201cRates are where they are because inflation is what it is,\u201d Kganyago said in an interview with Bloomberg in Sao Paulo on Wednesday on the sidelines of a Group of 20 meeting of finance chiefs and central bank governors. <\/p>\n\n\n\n
\u201cThe task of taming inflation is not yet done. Until that is done, I don\u2019t see why there should be a change in the monetary stance<\/strong>.\u201d<\/p>\n\n\n\n The central bank has kept its benchmark interest rate at an almost 15-year high of 8.25% since May, and Kganyago\u2019s remark echoed a line he has repeatedly used to argue that it is premature to loosen policy.<\/p>\n\n\n\n The central bank prefers to anchor inflation expectations at the 4.5% midpoint of its target range. Inflation has been above that level since May 2021 and is only expected to settle there next year.<\/p>\n\n\n\n \u201cThe inflation outlook is uncertain, and it\u2019s been volatile. Until inflation stabilizes where we want it, at 4.5%, and is sustained there, we don\u2019t see why we should change our monetary policy stance,\u201d he said.<\/p>\n\n\n\n Election Pressures<\/strong><\/p>\n\n\n\n The governor listed food prices, geopolitical risks and their impact on global supply chains and energy markets as some of the upside risks to the inflation outlook. <\/p>\n\n\n\n He also said the bank won\u2019t succumb to election pressures as the country prepares to vote on May 29.<\/p>\n\n\n\n The ruling African National Congress faces the biggest threat to its national majority since coming to power three decades ago, amid rising unemployment and power blackouts that have stalled economic growth.<\/p>\n\n\n\n That\u2019s led to renewed calls for the central bank to expand its mandate to include employment and economic growth.<\/p>\n\n\n\n \u201cThey can\u2019t put pressure; they can make noise. Constitutionally, we are supposed to act independently,\u201d said Kganyago. \u201cWhat is important is that the central bank is shielded from political interference.\u201d<\/p>\n\n\n\n When it gathers at the end of next month, the monetary policy committee will deliver one more rate decision before the elections.<\/p>\n\n\n\n Gold Reserves<\/strong><\/p>\n\n\n\n Finance Minister Enoch Godongwana announced a plan last week to ease the debt pressure on South Africa\u2019s finances by tapping R150 billion from profits on the country\u2019s Gold & Foreign Exchange Contingency Reserve Account, held at the central bank.<\/p>\n\n\n\n Asked about the drawdown and plans to transfer future profits from the account to the Treasury, the governor said it should come with a \u201cpermanent framework\u201d that is transparent and shows how reserves can be drawn and how liquidity is neutralized.<\/p>\n\n\n\n Inflation Target<\/strong><\/p>\n\n\n\n On plans to revise the central bank\u2019s inflation target, which has received National Treasury backing, Kganyago said a revision could only be lower than the midpoint of 4.5%, not higher.<\/p>\n\n\n\n Treasury said last week that work was underway to examine whether adopting a narrower inflation target range or shifting to single point goal made sense.<\/p>\n\n\n\n Kganyago, appointed governor in 2014, is currently serving his second five-year term, which ends in November.<\/p>\n\n\n\n
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