Interest rates might not fall as soon as anticipated
EZULWINI – Chairperson of the SADC Central Bank Governors Lesetja Kganyago has warned that global rates might not fall as soon as anticipated.
Kganyago who is also the South African Reserve Bank (SARB) Governor was speaking during the Southern Africa Development Community (SADC) Committee of Central Bank Governors (CCBG) Symposium held last Friday at the Royal Villas Hotel.
The symposium hosted by the Central Bank of Eswatini (CBE) was themed ‘Monetary Policy at Crossroads: Pressures from Inflation, Climate Change, Financial Stability and Financial Sector Resilience, as well as Persistent Geopolitical Issues.’
It was anticipated that interest rates might fall by the second half of the year. However, The SARB has repeatedly said interest rates will only be cut once CPI inflation reaches and is sustainably anchored around 4.5 per cent, the midpoint of its target range. It is worth noting that Eswatini’s stance on interest rates is largely influenced by what
South Africa does by extension of the Lilangeni being pegged on the Rand. The governor stated that the fight against inflation had not been won yet, hence, there was a need to keep the interest rates higher in order to suppress the high inflation rates.
Economies
He highlighted that inflation was a global challenge as developed economies were also grappling with it. Keeping interest rates higher would mean the cost of borrowing would remain higher as well. Currently, in Eswatini interest rate is fixed at 7.5 per cent and banks are lending at 11 per cent prime rate.
Lesetja added that it was important for central banks to set proper prices in their different economies.
He also highlighted that due to persistent geopolitical instabilities, the global economy was not clear as to which direction it was taking currently.
The Minister of Finance, Neal Rijkenberg, said the country and the SADC Region were witnessing high inflation, the negative impact of climate change in the economies which was massive and there were escalating geopolitical tensions.
“All these threaten the much-needed financial sector stability and introduce complexity in the functions and operations of central banks in the region and globally,” said the minister.
He stated that as the Ministry of Finance, they had elevated fears about inflation as it hurts the economy, businesses, and households. He said it was for this reason that they have entrusted central banks with the responsibility to use their expert knowledge to contain this enemy in the economies.
Maintenance
Meanwhile, CBE Governor Dr Phil Mnisi highlighted that in 2023, inflationary pressures nudged to an average of 5 per cent, reflecting hikes in food and general household maintenance, from 4.8 per cent the previous year.
Dr Mnisi mentioned that Eswatini was facing challenges meeting all the SADC Macro-Economic Convergence targets. He said based on the latest data from 2023, Eswatini has achieved two of the three primary targets. They said these were inflation and public debt targets. The country only met one out of the four secondary targets, namely the current account deficit.