South African central bank governor's comments on rate decision

PRETORIA (Reuters) -Below are some quotes from South African Reserve Bank Governor Lesetja Kganyago at a news conference to announce the central bank's latest interest rate decision.

DECISION

"Against this backdrop, the MPC (Monetary Policy Committee) decided to reduce the policy rate by 25 basis points, to 7%, with effect from the 1st of August. The decision was unanimous."

INFLATION TARGET

"Over the past few months, the prospect of a lower inflation target has bolstered the rand and lowered long-term borrowing costs. It is important to sustain this progress, and to minimise uncertainty about the longer-term objectives of monetary policy."

"Therefore, the MPC now prefers inflation to settle at 3%. In line with this, we have decided to aim for the bottom of our inflation target range, of 3%-6%."

"We welcome the recent moderation in inflation expectations and would like to see expectations fall further. This would expand policy space and make our framework more robust to shocks."

"The South African Reserve Bank will also continue working with the National Treasury to complete target reform and achieve permanently low inflation."

INFLATION

"Moving to inflation, the rand has strengthened and inflation expectations have moderated."

"Food inflation has risen, mainly due to meat prices. Fuel prices are also falling more slowly now, compared to the recent past."

"We therefore expect headline inflation to rise over the next few months, averaging 3.3% for the year."

"Prices then stabilise around the target objective over the rest of the forecast period."

"The risks to this outlook appear balanced."

ECONOMIC GROWTH

"There was also a downward revision to earlier GDP data. Along with an assumption of higher US tariffs on South Africa, this has caused us to mark down our 2025 growth forecast."

"That said, the recent data flow has been positive, suggesting that the economy picked up in the second quarter of the year."

"The economy's underlying growth trend remains low, mainly due to persistent supply-side problems, for instance in logistics."

"Higher levels of uncertainty also seem to have affected output, with business and consumer confidence deteriorating in the first half of the year."

"However, we still expect modestly higher growth in the coming years, supporting by ongoing structural reforms."

"The risks to the growth forecast are assessed as balanced."

(Compiled by Alexander Winning)

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