Too early to claim inflation win: S Africa central bank

Bloomberg

South Africa’s central bank says it’s premature to claim victory in the war against inflation and sees price growth stabilising at 4.5 percent only by the end of 2021.
While inflation has been inside the central bank’s target band of 3 percent to 6 percent for two years and was at the midpoint of this range in March, it’s “too early to claim that inflation is already permanently lower,” the South African Reserve Bank said in its Monetary Policy Review. The improved outcomes were mainly due to positive surprises such as low food-price growth and a stable exchange rate, the central bank said. The rand has appreciated 2.3 percent against the dollar this year.
These comments could further knock the chances of lower borrowing costs in 2019. The bank tightened policy in November even as the economy was coming out of a recession and kept its key rate last month and in January.
The central bank’s quarterly projection model has the repurchase rate moving to 7 percent by the end of 2021 and sees the current rate of 6.75 percent as “slightly expansionary,” according to the review. If the growth-inflation trade-off deteriorates, policymakers may prefer to avoid a tight stance, in which case inflation won’t stabilise at 4.5 percent by 2021, the central bank said.