ContextAfter-dinner remarks by the Governor of the South African Reserve Bank to the ambassadors and heads of foreign missions accredited in South Africa, hosted at the central bank.
Why it mattersSouth Africa's Governor explains to foreign diplomats why rates rose again as a second wave of inflation followed the 2022 surge.
- A second wave of inflation follows the 2022 surge.
- Inflation expectations rose sharply, even over two to five years.
- Geopolitical shocks and weak indicators cloud the outlook.
- Raise rates so inflation does not get stuck above 3%.
- Use the framework's flexibility to focus on the medium term.
- Rely on lower oil prices to help return to target faster.
Read the speech summary
1. A turbulent world
Addressing the heads of foreign missions at the Reserve Bank, Governor Lesetja Kganyago noted that since the last such dinner in 2019 the world has seen a pandemic, the Ukrainian and Middle Eastern wars, a major inflation surge and an AI boom, yet his 2019 worries, eroding multilateralism and pressure on central bank autonomy, remain. The global economy has proved resilient thanks to the AI-driven investment boom, loose fiscal policy, continued openness to trade without a retaliatory tariff spiral, and emerging markets, which grow near 4% and now make up over 60% of world output.
2. South Africa's re-rating
South Africa has had rating upgrades from Fitch and S&P, left the FATF grey list, seen six straight quarters of growth, ended load-shedding, and is expected to stabilise public debt this year, with long-term yields down over 300 basis points. The new 3% inflation target replaces the 3-6% range, though a supply shock forced a May rate rise and survey expectations rose even at long horizons, a reminder of why the bank acted to avoid getting stuck above target. The real economy has yet to show the gains, but he expects growth to return after fifteen lost years, and urged trust and multilateralism.