Lesetja Kganyago: Supply shocks, monetary policy and the 3% target
Public lecture by Mr Lesetja Kganyago, Governor of the South African Reserve Bank, at Rhodes University, Grahamstown, 4 May 2026.
Good day.
Last month in Washington, International Monetary Fund Managing Director Kristalina Georgieva described the situation central banks face as "bad or very bad". South Africa falls into the first category: in a world of price pain, we are suffering like everyone else – but things could be worse.
We came into this shock with inflation at our new 3% target. The policy stance was reasonably well calibrated, so we did not need to make urgent changes. We have a well-tested playbook for getting inflation back to target. In my speech today I will unpack these points and discuss the outlook for monetary policy.
I will start with the recent trajectory. The last two years have been generally positive for the South African economy. There has been clear reform momentum, including the adoption of a new 3% inflation target. This progress was rewarded with lower borrowing costs, a stronger rand and improving confidence. We exited the Financial Action Task Force grey list and our credit rating was upgraded by S&P Global Ratings. Growth seemed to be steadying and investment was beginning to grow again.
The global context was also quite supportive. Of course we had the challenges of fragmentation, including higher United States (US) tariffs. Nonetheless, many emerging markets – including South Africa – were enjoying higher commodity prices, renewed capital inflows, stronger currencies and lower interest rates. Global growth was proving unexpectedly resilient. The headlines may have been full of bad news but the bottom line was good. The economic data were improving.