South Africa’s central bank warned that mounting price pressures stemming from the war in Ukraine risk de-anchoring inflation expectations as it announced the first full overhaul of its monetary policy implementation system in almost a quarter century.
While the South African Reserve Bank officially targets price growth in a band of 3% to 6%, its monetary policy committee prefers to anchor expectations close to the midpoint of the range. A survey showed inflation assumptions over the next two years increased to 5% in the first quarter, from 4.7% in the final three months of 2021, raising the prospect of “more enduring” second-round effects on prices, it said Tuesday in its bi-annual Monetary Policy Review.
The bank doesn’t respond to short-term price shocks. Instead, its policy making seeks to address the wider second-round effects of higher prices, such as on transport and food costs and that could feed into wage setting.
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