The governor of the South African Reserve Bank (SARB), Lesetja Kganyago, said on Thursday (30th) that there is no reason to delay efforts to lower the inflation target to 3%, despite persistent inflationary pressures stemming from administered prices and wage increases. According to the governor, the central bank remains firm in its goal of aligning the country with international standards of price stability.
Kganyago explained that administered prices — such as those of electricity and water — along with multi-year public sector wage agreements, should not be used as a justification to postpone the target reduction. “Three-year wage agreements have been signed; they still need to be absorbed by the system, but we cannot wait for them to expire before setting the new target,” he stated.
Administered prices are set by regulatory authorities based on production and service delivery costs rather than market forces. This type of control directly impacts inflation, as it limits price flexibility and influences the cost of living. Still, Kganyago argued that strict control of inflation targets is essential to ensure the credibility and predictability of monetary policy.
The governor has been advocating for more than a year for a lower inflation target, arguing that the current 3%–6% range is uncompetitive and misaligned with international standards. He said that a lower target would help reduce economic uncertainty, strengthen investor confidence, and make South Africa’s economy more stable and predictable in the long term.
Although Finance Minister Enoch Godongwana has not yet formally adopted a lower target, the central bank indicated in July that it would begin focusing on the lower end of the current range. The move drew criticism from some analysts who accused the SARB of acting ahead of the National Treasury and without full institutional coordination. Kganyago dismissed the criticism, stating that communication between the central bank and the Treasury remains strong and based on mutual trust. “The Finance Minister and the Governor would not issue a joint statement or take a public position if there were no trust between them. I insist that there is already an understanding between the two parties,” he said.
According to SARB data, yields on South African government benchmark bonds have fallen between 80 and 160 basis points since April — a sign, the governor said, of continued confidence in the central bank’s monetary policy. Meanwhile, rating agency Fitch predicts that the National Treasury may officially announce a lower inflation target during the mid-term budget presentation on November 12.
One of the Treasury’s main concerns is the potential impact that revising inflation projections could have on medium-term revenue and expenditure forecasts. Although inflation performed better than expected in 2025, Kganyago warned of persistent risks, including geopolitical uncertainties that could affect the national currency — the rand — and inflation prospects for 2026. The rand has appreciated against the US dollar this year, but the governor cautioned that such gains may prove temporary.
Source: Reuters
