Lesetja Kganyago, Governor of the Reserve Bank of South Africa, spoke to the Global Business Report about South Africa’s Monetary Policy path in 2026
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Questions asked in this interview
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0:58Do you agree, or what's your outlook in that regard?
South Africa is showing fresh signs of economic stabilization, both by easing inflation, improved credit ratings, and progress on structural reforms. Data shows consumer inflation rose slightly to 3.6% in December while averaging a low 3.2% for 2025, the weakest inflation performance in more than two decades. The country has also adjusted its inflation target to 3% within a 1% tolerance band. Beyond prices, investor sentiment has improved following a credit rating upgrade by S&P, South Africa's removal from the FATF grey list and the European Union's high-risk register, alongside nearly 300 consecutive days without load shedding in the energy sector.
Lesetja Kganyago, Governor of the South African Reserve Bank, spoke to Arise Business Correspondent and the anchor of the Global Business Report at the ongoing World Economic Forum in Davos.
Let's talk about South Africa. Encouraging economic news for the South African delegation coming into Davos: Standard & Poor's upgrading their sovereign credit rating in November of 2025, being taken off the Financial Action Task Force grey list, also being taken off the European Union's high-risk jurisdiction list, and also the head of Eskom saying that there have been 300 consecutive days of no load shedding. Let's talk monetary policy, which is what of course we're going to be discussing with our guest today. Inflation just coming in for December, a slight uptick to 3.6%. This is headline from 3.5 in November. Inflation in South Africa though averaging about 3.2% for the year, lowest in about two decades. And also we've heard the Reserve Bank of South Africa reducing or adjusting its interest rate band from between 3% to 6% down to 3% with a 1% tolerance. So we're going to talk about that plus a whole lot more. I am incredibly excited to have Lesetja Kganyago, the Governor of the Reserve Bank of South Africa, with us. You're welcome, sir. Thank you so much for being with us. Inflation, so those numbers coming in for December, 3.6% from 3.5%. Analysts are still expecting rate cuts this year. Do you agree, or what's your outlook in that regard?
Well, we have got a policy meeting coming next week, so you will know for sure on Thursday exactly what we would do. The inflation figure that came out is in line with the expectations of the Reserve Bank and interestingly with that of the market. And inflation averaged 3.2% in 2025. But that is the past. The past does not determine what future policy should look like. What is important is the outlook. And the outlook for inflation over the next 12 months is that we will continue to have inflation with a handle of 3%, and we expect the average for inflation this year to be around 3.5%. And we will continue to assess incoming data. In terms of the rates outlook, at the November meeting, our quarterly projection model had forecast two rate cuts of 25 basis points over the next 12 to 18 months. But this is just a policy guide that changes from meeting to meeting and depending on incoming data and outlook, and it is by no means a definitive path of where monetary policy is going.
Duly noted, sir. Governor, can you talk to us about the decision to adjust the CPI target from between 3% to 6% down to 3% with a 1% tolerance band? Can you talk to us about that?
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