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Lesetja Kganyago: CPI under control but risks remain

South Africa’s CPI slowed to 3.8% in March, the lowest figure since January 2011, as the end of the worst drought in decades helped push down food prices.

FILE: Reserve Bank governor Lesetja Kganyago. Picture: EWN.

JOHANNESBURG - South Africa’s consumer price inflation is under control but it is too early for the central bank to declare victory in its pursuit to anchor inflation expectations closer to the midpoint of the 3-6% target range, Governor Lesetja Kganyago said.

CPI slowed to 3.8% in March, the lowest figure since January 2011, as the end of the worst drought in decades helped push down food prices.

In a speech posted on the South African Reserve Bank (SARB) website on Wednesday, Kganyago said the benign inflation environment was not expected to continue as the expectation was the March reading was the low point in the current cycle.

“Inflation appears to be under control, but there are incipient risks,” Kganyago said.

He said the SARB would need to see further declines in CPI, or at least a stabilisation at recent levels, to feel confident that inflation expectations have fallen on a sustained basis.

“In other words, it is too early to declare victory in our quest to anchor inflation expectations closer to the midpoint of the target range,” Kganyago said.

The central bank cut its main interest rate by 25 basis points to 6.5% in March on the back of easing inflation but said that it expected consumer prices to rise above 5% in the medium term.

The next rates decision will be announced on 24 May.