Lesetja Kganyago: Globalised stagflation and the emerging market response

Address by Mr Lesetja Kganyago, Governor of the South African Reserve Bank, at the Macro Week 2023, Peterson Institute for International Economics, Washington DC, 11 April 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
13 April 2023


Ladies and gentlemen, it is a great pleasure to be invited back to the Peterson Institute. While advanced economies dominate the newsprint, I want to speak today about how the global inflation problem impacts emerging economies, and South Africa specifically.

A broad spectrum of emerging economies are experiencing inflation rates that are persistent and well above target. And yet, five years ago, many emerging and developing countries seemed on a steady path towards lower, and more stable inflation. Are emerging economies able to get back onto that path, given the challenges presented by the current global environment?

The short answer to this must be 'yes', but we need to recognise that doing so will not be easy. Certainly, the headwinds to constructive policymaking have increased and global conditions are far from benign. The surge in global inflation and the many accompanying structural changes risk pushing emerging economies away from better policies.

I believe there are some grounds for optimism, despite the headwinds. In particular, we can build on the experience we have gained in emerging market central banking and monetary policy in addressing stagflation. A key lesson from our collective experience has to do with how central banks can use transparency to improve the effectiveness of monetary policy. For advanced economies, arguably, the stagflation challenge demands better communications and clarity of policy. For emerging economies, many of which moved faster to tighten policy, central bank transparency can play a role in setting the tone for public policy more broadly, helping to ease or resolve our particular non-monetary constraints to better inflation outcomes.