South African Reserve Bank Governor Lesetja Kganyago says the rand has further room to grow and strengthen against global currencies.
The SARB head told Reuters on Thursday that if government continues with its reforms and fiscal policies the rand can only go up in value.
The rand has strengthened by around 2.5% against the dollar since the start of 2024.
"There should be positive momentum and that positive momentum is not going to be something just driven by the markets," Kganyago said.
"It's going to be whether government continues to act with resolve and stays the path in terms of prudent policies and structural reforms going forward," he noted.
The governor explained that progress on reforms could strengthen the currency while also boosting SA’s bonds and stocks.
He also added that it was important for government to restore investor or consumer confidence.
Lower inflation target
Last week Kganyago said that the Reserve Bank is now pushing for a lower inflation target.
In 2000, the Reserve Bank adopted an inflation target between 3% and 6%.
The SARB has been on a mission to lower this inflation, going from 3% to 5% and eventually 2% to 4%.
In September, Statistics SA announced that headline consumer inflation in South Africa fell to 4.4% year-on-year in August from 4.6% in July, with this being the third consecutive month of inflation falling.
This week, inflation dipped below 4% to 3.8%.
“Annual consumer inflation cooled for a fourth consecutive month, easing to 3,8% in September from 4,4% in August. This is the lowest inflation print since March 2021, when the rate was 3,2%.
“On average, prices increased by 0,1% between August 2024 and September 2024,” said StatsSA.
Now Kganyago believes that SA has the opportunity to lower inflation further.
“We have an opportunity to achieve permanently lower inflation and therefore permanently lower interest rates,” Kganyago said.
“Executed effectively, a lower target could be achieved at little cost, just as we moved to 4.5% at little cost,” he noted.
When compared to other countries inflation in South Africa is still relatively high, according to the Governor and can be brought down.
“We have a relatively high inflation rate. We often speak as if this is a structural, inevitable thing and not a policy choice. But the fact is, we could have a lower inflation target, like almost all our peers, and with it, lower inflation,” Kganyago explained.
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