South Africa's central bank governor to delivers keynote address
South Africa's central bank governor, Lesetja Kganyago, arrives to deliver a keynote address on monetary policy, growth and jobs at the University of the Witwatersrand in Johannesburg, South Africa, November 1, 2022. Reuters

South Africa still has space to raise interest rates, its central bank governor said on Tuesday ahead of a rate decision later this month, citing the need to get inflation expectations more anchored around the midpoint of its target range.

The South African Reserve Bank (SARB) has raised its main lending rate at its last six monetary policy meetings in a bid to get inflation under control. Its next decision is due on Nov. 24.

"We have not reached the 'end' of our policy rate space," Governor Lesetja Kganyago said in a lecture at Johannesburg's University of the Witwatersrand.

"Inflation expectations, for the most part, are proving to be more responsive to current inflation outcomes than we would like, and less anchored around the midpoint of our target."

South Africa's headline consumer inflation slowed to 7.5% in September from 7.6% in August, but it is still well above the SARB's 3%-6% target range.

"At present, our repo rate is at 6.25%, still below long-term levels, but rising to a more sustainable long-term level that is consistent with inflation stabilising at 4.5%," Kganyago said.

He also used the lecture to make the case that the central bank's policy objectives should not be broadened in a way that could lead to sharply higher inflation.

The SARB has come under pressure in recent years to expand its mandate beyond price stability to also boost job creation and lift flagging economic growth.

"Employment and growth are both limited by factors that are beyond the reach of the central bank's toolset," Kganyago said.

"The best chance we have with monetary policy to get faster, more job-rich growth is to maintain our focus on price stability with flexible inflation targeting - a proven framework."