Rate cuts not likely‚ says Reserve Bank governor

Interest-rate cuts are not imminent in SA as inflation remains outside the 3%-to-6% target band‚ Reserve Bank Governor Lesetja Kganyago says.

Inflation breached the target band to 6.1% year on year in September after temporarily falling to within the band at 5.9% in August.

The Bank expects inflation to average 6.4% in 2016‚ 5.8% in 2017‚ and 5.5% in 2018. “Should the forecast materialise‚ the hiking cycle may be nearing its end. However‚ this does not mean interest-rate reductions are imminent as we would like to see inflation more firmly within the target range on a sustainable basis over the forecast horizon‚” Kganyago said at a South African Chamber of Commerce and Industry annual convention on Thursday.

The Bank's monetary policy committee will hold its last meeting of the year in November and is expected to keep rates on hold.

Kganyago reiterated that monetary policy “cannot be an engine for sustained growth” and that structural reforms‚ instead‚ could ignite growth. The reforms Kganyago identified included infrastructure development‚ education‚ labour-market reforms‚ product-market efficiency‚ and ensuring institutional strength.

The National Development Plan‚ which contains proposals on structural reforms‚ lacked “velocity” in implementation‚ Kganyago said.

Speaking on institutions‚ the governor said all of society had to “resist attempts” to undermine SA's strong institutions which were needed to support long-term investments.

– TMG Digital/BusinessLIVE