Sarb ‘flexible’ as Gordhan’s summons knocks rand

South Africa’s headline inflation has settled near the upper end of the central bank’s target band of between threeand six percent but the bank’s policy stance would remain flexible, says Governor Lesetja Kganyago.

According to Kganyago yesterday, prices remained sensitive to currency shocks and sharp increases to food inflation, which together were fuelling high wage demands in a stalling economy struggling to create jobs.

“One of the things we need is for price and wage demands to abide by the inflation target, so we achieve a lower inflation rate,” Kganyago said.

Headline inflation slowed more than expected yesterday, to 6% year-on-year in July, its lowest point in 2016, according to Statistics South Africa.

Economists said lower inflation could see the Reserve Bank cut lending rates after keeping them on hold at its last two policy meetings, although much hinged on currency.

The rand weakened about f4% after news that Finance Minister Pravin Gordhan had been summoned to appear before the crime unit, Hawks, over an investigation into a covert spy unit inside the revenue service.

“This will overshadow other news, despite the relief granted by a better-than-expected July inflation print,” chief Africa economist at Standard Chartered Bank Razia Khan said. –