The decline in inflation around the globe is an encouraging economic development, as this could lead to interest rate cuts.
This was observed by the South African Reserve Bank Deputy Governor Fundi Tshazibana during the Common Monetary Area (CMA) Central Banks Governor’s Symposium held at the Happy Valley Hotel on the 17th of November 2023.
Tshazibana was speaking on behalf of the SARB Governor Lesetja Kganyako who was the keynote speaker on the day but could not attend because of a family bereavement.
She said the good news is that in the past year or so, inflation rates have declined around the world. She, however, expressed caution on core inflation which has remained rather sticky.
The Deputy Governor further noted that longer-term inflation expectations at least in major advanced economies, have remained reasonably well anchored, a testimony to central banks retaining their credibility.
“The monetary policy tightening episode appears largely complete. While central banks maintain vigilance against persistently high inflation, they demonstrate rising evidence of the transmission of earlier rate hikes to financial conditions and credit demand. Consequently, financial markets now see no probability of an additional hike in the United States (US) or Eurozone. In emerging economies, some of those central banks which had acted early and proactively to deal with inflation now have the flexibility to consider rate cuts.”
She added that CMA countries have been economically resilient with moderate inflation rates.
“We have also observed moderating inflation rates, as well as some resilience in economic activity, in CMA countries. In South Africa, inflation stood at 5.4% year on year in September, down from a peak of 7.9% in July last year. A similar pattern has been observed in other CMA countries, and indeed, my colleagues at the Central Bank of Eswatini recently revised their 2023 inflation forecast from 5.55% to 4.93%.3 Inflation also fell faster than expected in Lesotho, and in Namibia, with expectations of a further decline in 2024.”