South African Reserve Bank Governor Lesetja Kganyago has warned that rising global energy prices, higher food costs and geopolitical uncertainty could keep inflation elevated, with consumer prices expected to return to the central bank’s 3% target only in 2028.
According to Reuters, Kganyago made the remarks on Thursday, October 15, 2026, during an interview on the sidelines of the International Monetary Fund and World Bank annual meetings in Bangkok, Thailand.
The governor expects South Africa Inflation to average 4.4% in 2026 before easing into the central bank’s tolerance band in 2027 and reaching the 3% target in 2028.
His comments come after the South African Reserve Bank raised its benchmark interest rate by 25 basis points to 7.25% in September, following a pause in July.
The outlook suggests that South African Interest Rates could remain restrictive as policymakers assess the effects of higher energy costs, food prices and international economic uncertainty.
Kganyago declined to indicate whether another rate increase was likely, explaining that future decisions would depend on economic conditions at each monetary policy meeting.
South Africa Inflation Expected to Reach 3% Target in 2028
The central bank expects inflation to remain above its preferred target for another two years.
Kganyago said consumer price growth would average 4.4% this year before moving within the bank’s tolerance band in 2027.
The forecast places the return to the 3% inflation target in 2028, reflecting concerns about persistent price pressures.
The latest official figures showed that South Africa Inflation rose slightly to 4.4% in August.
Housing and utilities, transport, insurance and financial services were among the main contributors to the increase.
The August reading matched the central bank’s projected average inflation rate for 2026, although the annual forecast remains subject to changes in economic conditions.
Kganyago expressed concern that underlying inflation measures were already showing signs of renewed pressure.
“So far, the measures of underlying inflation point to an upturn in inflation, and that is a concern,” he told Reuters.
The outlook reinforces the importance of monitoring price developments before determining the direction of South African Interest Rates.
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The South African Reserve Bank raised its benchmark interest rate by 25 basis points to 7.25% in September.
The decision was unanimous among monetary policymakers and followed a pause in July.
The increase was intended to address inflationary pressures and support the central bank’s efforts to bring consumer price growth towards its 3% target.
With South Africa Inflation expected to remain above target until 2028, monetary policy is likely to remain focused on controlling price pressures.
However, Kganyago avoided signalling another rate increase.
He described the current monetary policy stance as “moderately restrictive” and said decisions would continue to be made “meeting by meeting”.
His remarks indicate that the central bank is maintaining flexibility rather than committing to a predetermined interest rate path.
The next monetary policy decision is scheduled for November.
Until then, developments in inflation, global energy markets and domestic economic conditions will remain important factors influencing expectations for South African Interest Rates.
Global Energy and Food Prices Threaten South Africa Inflation Outlook
International developments remain a major source of uncertainty for South Africa’s inflation outlook.
Kganyago identified geopolitical tensions, rising oil prices, fertiliser costs, the possibility of El Niño and disruptions to grain supplies through the Black Sea as important risks.
“The risks to the outlook, of course, they have to do with the geopolitical uncertainty, which feeds into the oil price, what’s happening with fertiliser prices and what that could mean for the food outlook, there’s the risk of El Niño and there is risk to the grain supply chain through the Black Sea,” he said.
These risks affect different parts of the economy.
Higher oil prices can increase transport and production costs, while more expensive fertiliser can place additional pressure on agricultural production.
Unfavourable weather conditions and disruptions to grain supply chains can also influence food availability and prices.
For South Africa Inflation, the combined effects could make it more difficult for consumer price growth to return to the central bank’s target within the expected timeframe.
The governor’s comments reflect concern about possible future price increases, not confirmation that every identified risk will materialise.
The central bank will therefore continue assessing how these developments affect the inflation outlook before adjusting monetary policy.
Stable Rand Helps Limit Inflationary Pressures
Despite international economic uncertainty, South Africa’s currency has remained relatively stable this year.
Kganyago said the rand had changed little against the U.S. dollar in 2026, even as the dollar strengthened.
That stability has helped offset some inflationary pressures associated with higher international energy prices.
In previous periods, rising oil prices were sometimes accompanied by a weaker rand, increasing the domestic cost of imported energy.
The currency’s recent performance has helped reduce that additional pressure.
“In the past, when you had the oil price rise, we would have had a depreciation of the currency as well. It has been fairly stable (this year), but still that is no case for us to be complacent,” Kganyago said.
He identified fiscal consolidation and an appropriate monetary policy stance as factors supporting the currency’s resilience.
The relatively steady rand provides some support for efforts to manage South Africa Inflation, although it does not eliminate the effects of higher international commodity prices.
Currency stability also remains relevant to the outlook for South African Interest Rates because exchange rate movements can influence the domestic prices of imported goods.
South African Interest Rates Face November Policy Test
The South African Reserve Bank’s next monetary policy meeting will take place in November.
The decision will follow September’s unanimous 25-basis-point increase and the latest warnings about inflation risks.
For policymakers, the immediate issue is balancing the need to contain price pressures with the broader economic effects of restrictive borrowing conditions.
Higher interest rates can help moderate inflation by influencing borrowing, spending and demand.
However, they also increase financing costs for households and businesses.
The central bank’s challenge is to maintain progress towards its inflation target while responding to changing economic conditions.
Kganyago’s description of the current policy stance as moderately restrictive suggests that the bank considers borrowing conditions sufficiently tight to exert some pressure on inflation.
Nevertheless, he has not committed to maintaining, raising or lowering rates at the next meeting.
The direction of South African Interest Rates will depend on the economic information available when policymakers meet.
With South Africa Inflation forecast to average 4.4% in 2026, the bank’s assessment of underlying price pressures will remain central to that decision.
What This Means For Africa
South Africa’s inflation outlook matters beyond its borders because the country is one of Africa’s major economies and an important financial and commercial market.
The warning from Governor Lesetja Kganyago demonstrates how global developments can complicate efforts by African central banks to maintain price stability.
Higher energy costs, fertiliser prices and disruptions to international grain supplies can affect economies that depend on imported fuel, agricultural inputs and food commodities.
For South Africa, these pressures have contributed to concerns that inflation may remain above the central bank’s 3% target until 2028.
The outlook for South Africa Inflation also illustrates the importance of domestic economic stability when international markets become uncertain.
The rand’s relative stability has helped limit some of the additional pressure that could have emerged from higher oil prices.
That experience shows how currency performance, fiscal management and monetary policy can interact when countries face external price shocks.
At the same time, the central bank’s decision to raise rates to 7.25% highlights the trade-offs involved in controlling inflation.
Restrictive monetary policy can support price stability, but it also affects borrowing costs and financial conditions for businesses and households.
Other African central banks face similar decisions when balancing inflation risks against economic activity, although their policy responses depend on domestic circumstances.
The South African Reserve Bank’s approach remains focused on bringing inflation back towards its target without committing to a fixed sequence of interest rate decisions.
For investors and businesses across the continent, the November policy meeting will provide another indication of how the bank is responding to changes in energy prices, food costs and underlying inflation.
The broader lesson is that stronger domestic financial conditions can provide some protection against international shocks, but they cannot remove global risks entirely.
As South Africa Inflation moves towards its projected 2028 target, the path of South African Interest Rates will remain an important indicator of how policymakers are managing the country’s economic outlook.
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Image Credit: Bloomberg
