Kganyago says inflation 'won't be a problem' as bank cuts rates for fifth time this year

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South African Reserve Bank Governor Lesetja Kganyago.
South African Reserve Bank Governor Lesetja Kganyago.
Gallo Images/Business Day/Freddy Mavunda

Reserve Bank Governor Lesetja Kganyago has said that inflation is expected to remain contained over the next two years, despite concerns from some economists that SA is heading toward a deflation "danger zone".

The governor was speaking during a briefing on Thursday evening following the repo rate announcement. The Monetary Policy Committee decided to cut rates by 25 basis points, in line with market expectations. This brings the repo to 3.5%, the lowest rate since the repo system was introduced in 1998. The central bank has slashed interest rates by 300 bps so far this year.

Some economists however feel the MPC could have introduced deeper cuts, given the unprecedented economic crisis brought on by the Covid-19 pandemic. Taking into account the collapse in growth and weak inflation, there is "scope" for deeper cuts, said Old Mutual Chief Economist Johann Els. He previously told Fin24 that the bank should be responding to the risk of deflation.

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