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S.Africa's cenbank governor says will look to keep lending rates predictable

Credit: REUTERS/Siphiwe Sibeko

South Africa's central bank will seek to keep lending rates predictable and in line with its inflation targeting mandate to support a flagging economy, Governor Lesetja Kganyago said on Friday.

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PRETORIA, July 26 (Reuters) - South Africa's central bank will seek to keep lending rates predictable and in line with its inflation targeting mandate to support a flagging economy, Governor Lesetja Kganyago said on Friday.

"A more stable and predictable path of interest rates will enhance the environment for sustained economic growth," Kganyago said at the Reserve Bank's annual general meeting.

The country suffered a decline in first-quarter economic growth of 3.2%, the worst in a decade, as power outages by state utility Eskom hit mining, manufacturing and retailers.

In response, the bank reduced benchmark rates by 25 basis points to 6.5% on July 18. However, the bank poured cold water on further cuts, saying it would watch the policy path followed by developed market central banks and local price-growth.

June consumer inflation remained stready at 4.5%, data showed on Wednesday, at the exact midpoint of the bank’s target range of between 3% and 6%.

The bank's Quarterly Projection Model forecasts consumer prices averaging 5.1% in 2020 and 4.6% in 2021.

Kganyago hinted again in a speech on Wednesday that the regulator was considering a move to a definite target for inflation, a suggestion seen as a dovish turn by some analysts.

On Friday, however, he warned that the persistence of subdued inflation was "not certain, meaning that the MPC will continue to exercise vigilance in the years ahead".

(Reporting by Mfuneko Toyana; Editing by Alison Williams, William Maclean)

((macdonald.dzirutwe@thomsonreuters.com; +27 11 595 2850; Reuters Messaging: macdonald.dzirutwe.thomsonreuters.com@reuters.net))

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