Mboweni: Inflation expectations have deteriorated

It has recently become evident that inflation has become more generalised, and inflation expectations have also deteriorated somewhat, South African Reserve Bank (SARB) Governor Tito Mboweni told the 88th ordinary general meeting of the shareholders of the bank on Thursday.

He noted that CPIX inflation at a current 13% is “clearly very high”.

Added to this, he pointed to the fact that since early 2008, the rand has had a “major impact” on the inflation outcome, as did the trend in unit labour cost and electricity price developments.

He emphasised that to prevent second-round effects it is important that inflation expectations remain “well anchored”.

“Failure to respond appropriately could inevitably cause expectations to become dislodged and result in a further acceleration of inflation. The bank remains committed to bringing inflation back to within the target within a reasonable timeframe,” he said.

Mboweni said “anchor” means that expectations need to be on the low side.

He also said that asset price developments in the form of lower equity prices and a subdued housing market reduce the pressure on inflation emanating from wealth effects.

He also hopes that lower oil prices will last for a long time.

On the fact that inflation has been outside the target band, he said that a flexible inflation targeting regime should allow for temporary deviations in the event of exogenous shocks in order to avoid “excessive output variability”.

Global and domestic developments are expected to continue to pose challenges for the Reserve Bank in the coming year, Mboweni said.

However, the South African banking sector has been relatively insulated from the global financial-market uncertainties, but greater vigilance has been required in supervising and regulating the sector.

He also mentioned that the current level of official gross gold and foreign-exchange reserves is not excessive, and reserves will continue to be accumulated at a moderate pace when market conditions permit. — I-Net Bridge

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Evan Pickworth
Guest Author

Related stories

WELCOME TO YOUR M&G

Already a subscriber? Sign in here

Advertising

Latest stories

G is for glamour, not garage shop

Pantry by Marble is disrupting the forecourt shop status quo by offering restaurant-quality services on site

If the state won’t deal with civil war criminals, then...

Liberia decided not to prosecute anyone for crimes committed during its first and second civil wars. Now, one organisation is documenting and aiding prosecution outside the country

Home Suite Hotel: A hidden gem in Sea Point

Founded by the man behind LIFT Airlines, Gidon Novick, Home Suite Hotel knows a thing or two about curating a fresh experience on an old concept.

Latest design and foodie trends at Durban Home Garden Show

The event celebrates 40 years of the city’s design scene. The 2022 edition brings together fashion folk, beer culture, architecture and greenery, while giving visitors their cultural fix
Advertising

press releases

Loading latest Press Releases…
×