South African Central Bank Warns US Tariffs Could Hinder Interest Rate Cuts
In a recent interview, South African central bank Governor Lesetja Kganyago expressed concern that protectionist policies implemented by the United States could potentially hinder future interest rate cuts by central banks due to inflationary pressures.
Despite acknowledging uncertainties in the economic outlook, Kganyago highlighted the potential for inflation to offset the disinflationary efforts pursued by central banks in recent years. He emphasized the risk of an abrupt halt in monetary policy accommodation, which may have been enabled by the easing of rates in the wake of lower inflation.
Central banks worldwide, including the US Federal Reserve, the European Central Bank, and the South African Reserve Bank, initiated rate reductions as inflation began to decline in the past year. The South African Reserve Bank has implemented a 25 basis point cut in November, bringing its benchmark interest rate to 7.75%. While a further quarter-point reduction is anticipated when policymakers meet in January, the easing cycle is expected to be brief and modest.