SA needs a 'particular medicine' for inflation or it risks 'intensive care': SARB's Kganyago | Business

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Complaints about surging living costs predated those about higher interest rates and the South African Reserve Bank first and foremost had to protect the local buying power of the rand, Governor Lesetja Kganyago said. | News24_Business

News24 Business front pageIt is incumbent on South Africa’s central bank to increase borrowing costs to tame sticky inflation, even if its actions gave rise to financial distress, Governor Lesetja Kganyago said.

Complaints about surging living costs predated those about higher interest rates and the South African Reserve Bank first and foremost had to protect the local buying power of the rand,"We unfortunately have to administer particular medicine in order to tame inflation," he said."Failure to administer that medication might result in the patient having to undergo surgery or end up in intensive care.

The central bank’s monetary policy committee has raised the benchmark rate at its 10 past meetings with the aim of bringing inflation back to the 4.5% midpoint of its target range, where it prefers to anchor expectations. The key repurchase rate stands at 8.25%, the highest level in 14 years. Inflation slowed more than projected to a 13 month-low of 6.3% in May, easing pressure on the bank to continue raising borrowing costs.

"When inflation rises or stays elevated, it is appropriate that monetary policy adjusts and that adjustments take place through interest rates in order to bring inflation down," Kganyago said.

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