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Kganyago warns of perils of inflation as Mandela notes unveiled

The central bank’s MPC likely to keep the repo rate steady, Bloomberg survey shows.
Sarb governor Lesetja Kganyago at the launch of new banknotes and coins commemorating former President Nelson Mandela. Picture: Bloomberg

Reserve Bank Governor Lesetja Kganyago used the launch of new banknotes and coins commemorating former President Nelson Mandela to warn of the perils of inflation.

“When inflation walks through the door, public trust in the currency jumps out the window and banknotes and coins become worthless pieces of paper and metal,” Kganyago said on Friday at Freedom Park, a monument outside the capital, Pretoria, honoring national heroes. “Imagine having to cart your cash in a wheelbarrow to buy a loaf of bread.”

The central bank’s Monetary Policy Committee cut its benchmark rate last July and in March as inflation slowed, but will probably hold it at 6.5% next week, according to a Bloomberg survey. South African policy makers have warned over the past few months that price risks are lurking.

The annual inflation rate was 4.4% in May, well below the 6% upper end of the central bank’s target band. The central bank says it prefers price-growth expectations at the 4.5% midpoint of the range. The rand had its worst month in more than two years in June and with oil prices having climbed this year, that adds upside risks to inflation.

The new notes and coins are being introduced to commemorate the life of Mandela, the nation’s first black president, who would have turned 100 on July 18.

©2018 Bloomberg L.P.

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