– FIN24.

Deputy Governor of the South African Reserve Bank, Kuben Naidoo.

JOHANNESBURG – The Reserve Bank expects inflation to remain close to 4.5 percent over the next two to three years, which is why it has not been hasty in raising interest rates, according to deputy governor Kuben Naidoo.

Naidoo on Wednesday was speaking during a webinar about the domestic economic outlook. The webinar was hosted by Ninety One.

While many emerging markets have experienced rising inflation, and have tightened monetary policy, South Africa has not followed suit.

“We have not had to tighten, we are pretty confident that inflation will remain close to the midpoint in the next two to three years. Some countries are not in that position,” said Naidoo.

He noted that there has been an increase in food prices, but this has not passed through to other aspects of inflation. “We have seen inflation behave,” said Naidoo.

While inflation hit a 30-month high of 5.2 percent in May 2021, Naidoo said this was off a low base. It had been 2.1 percent 12 months prior, due to lockdown restrictions that slowed economic activity.

Stripping out that “once-off blip” Kuben said that the base case for inflation is still likely to “behave” over the next 12 months.

He attributed this to the success of the Reserve Bank’s efforts over the past five to 10 years to get inflation, as well as inflation expectations lower.

During a separate webinar on the SA economic recovery, chief economist of the Bureau for Economic Research, Hugo Pienaar noted that there had been rising global inflation.

Pienaar said this is mainly transitory. The BER expects the Reserve Bank to keep the repo rate unchanged for the rest of the year. 

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