Rate hiking cycle not over yet, says SARB
The bank has hiked lending rates by a combined 200 basis points since early 2014.
JOHANNESBURG - South Africa's rate hiking cycle is not yet over as inflation remained elevated and sharp moves in the rand currency were affecting prices, the central bank's deputy governor Daniel Mminele said on Friday.
Mminele said while the bank recognised the rand's recent recovery, it was also aware that the trend could be easily reversed and lead to second round effects of food inflation and higher wage demands.
He said although headline inflation currently stands at 6.0 percent, on the upper end of the central bank's target range of between 3 to 6 percent, the bank expected it to remain above the target until the middle of 2017.
"While the recent improvements to the inflation outlook are a positive development, the risks in the policy environment remain too numerous to be able to say definitively that the hiking cycle is over," Mminele said in a speech posted on the bank's website.
He said the South African Reserve Bank's (SARB) policy committee had chosen a gradual approach to hiking rates that would be data-dependent. The bank has hiked lending rates by a combined 200 basis points since early 2014.
"The gradual hiking cycle has been a response to the concern that repeated shocks would drive inflation persistently above the target range which could create a 'new normal' target of 6% plus a supply shock in the public's consciousness," he said.
The rand has gained about 10% against the dollar since June. However, nearly half of those gains were erased this week when police summoned Finance Minister Pravin Gordhan over an investigation into a surveillance unit he set up while in charge of the revenue service.