Fitch Ratings expects South Africa\u2019s National Treasury to formally lower the nation\u2019s inflation target to 3% next month, endorsing the central bank\u2019s adoption of the goal in July.<\/p>\n\n\n\n
The announcement is expected when Finance Minister Enoch Godongwana presents his Medium-Term Budget Policy Statement on 12 November, Thomas Garreau, director for Middle East and Africa sovereign ratings, said in a webinar on Tuesday.<\/p>\n\n\n\n
\u201cWe do consider that the upcoming medium-term budget speech will formally announce\u201d a 3% target, he said. <\/p>\n\n\n\n
The Treasury is in a closed period before the presentation by Godongwana, who\u2019s previously said he\u2019ll make an announcement \u201cas soon as is practical.\u201d<\/p>\n\n\n\n
Reserve Bank Governor Lesetja Kganyago announced in July that monetary policymakers now prefer to anchor inflation at the bottom end of their official 3%-to-6% target band that hasn\u2019t been revised since the framework was introduced in 2000. <\/p>\n\n\n\n
The lender previously targeted inflation at the 4.5% midpoint.<\/p>\n\n\n\n
\u201cShifting to a single-point target that in our baseline scenario will be announced in the MTBPS doesn\u2019t mean that it will strictly be implemented immediately,\u201d Garreau said. <\/p>\n\n\n\n
\u201cWe do consider that SARB will have some tolerance for inflation that will be slightly above this.\u201d<\/p>\n\n\n\n
Kganyago has repeatedly said that getting the backing of the Treasury is crucial to helping guide inflation to the 3% target. <\/p>\n\n\n\n
A joint statement by the two authorities on the topic last month was a key driver of investor optimism toward South African assets, he said in an interview on 9 October.<\/p>\n\n\n\n
Since Kganyago\u2019s announcement in July, the yield on South African benchmark 10-year bond has fallen 90 basis points to 8.9% by 15h00 in Johannesburg on Tuesday. <\/p>\n\n\n\n
The rand has strengthened more than 4.5% over that period to trade at 17.36 per dollar.<\/p>\n\n\n\n
The central bank\u2019s quarterly projection model sees inflation peaking at 4% this quarter, before easing to 3% by end-2027, indicating there\u2019s room for 75 basis points of interest-rate cuts next year. <\/p>\n\n\n\n
That\u2019s in line with Fitch\u2019s own forecasts.<\/p>\n\n\n\n
\u201cWe do anticipate a minor increase by the end of the year, there is still some sticky inflation in food,\u201d Garreau said. <\/p>\n\n\n\n
\u201cBut we do consider that inflation will gradually decline to a level that would be close to 3% by the 2027 fiscal year.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
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