Kganyago reaffirms 3 percent inflation target following oil shock

The South African Reserve Bank adopted a tighter 3 percent inflation target in 2025, replacing its former 3–6 percent band.

Despite an exogenous oil shock pushing headline inflation to 4.5 percent in May and 5 percent in June 2026, Governor Lesetja Kganyago stressed that monetary policy will return inflation to target over time.

The central bank raised its policy rate to 7 percent in May before holding it steady in July.

Prior to the shock, models projected policy rates easing toward 6 percent.

Kganyago emphasized that lower inflation delivers structurally lower borrowing costs, noting that long-term bond yields have stabilized while foreign exchange reserves reached 74 billion dollars.

Beyond monetary policy, the central bank completed key structural and regulatory milestones over the past year.

Following its 2022 greylisting by the Financial Action Task Force, South Africa exited the list in late 2025 after substantial institutional investments.

The SARB is also modernizing payment infrastructure through its 50 percent stake in BankservAfrica, now rebranded as PayInc. Regarding technological developments, Kganyago highlighted the dual nature of artificial intelligence and stablecoins, advocating balanced regulation for crypto assets that aligns with capital flow controls while fostering innovation.