Lesetja Kganyago: Supply shocks, monetary policy and the 3% target
At a Glance
The desk interprets Lesetja Kganyago's recent remarks on supply shocks and monetary policy as a clear signal of the South African Reserve Bank's commitment to maintaining its inflation target of 3%. Per the full note source, Kganyago emphasized the importance of addressing supply-side constraints while balancing monetary policy to ensure price stability. This stance aligns with our view that the SARB will remain vigilant against inflationary pressures, particularly as global commodity prices fluctuate. With the consensus target for USD/ZAR at 1.075, the market is poised for potential volatility as traders assess the implications of these insights.
Full Analysis
What the desk is arguing
The desk asserts that the South African Reserve Bank's focus on supply shocks indicates a proactive approach to maintaining its inflation target of 3%. This perspective is reinforced by Kganyago's emphasis on the need for a balanced monetary policy that responds to external pressures without compromising domestic price stability.
Supporting this view, the SARB's recent actions suggest a readiness to adjust interest rates in response to inflationary signals. The central bank's inflation forecast remains a critical data point, with Kganyago noting that sustained supply disruptions could necessitate tighter monetary policy to anchor expectations.
Where it sits in our coverage
Our consensus target for USD/ZAR is 1.075, with a range from 1.04 to 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's view aligns closely with jpmorgan, which anticipates a stronger ZAR, while diverging from bofa, which holds a more bearish outlook at the lower end of the range.
How other firms see it
Firms aligned with the desk's view, such as jpmorgan, see potential for ZAR appreciation driven by a proactive SARB. Conversely, bofa expresses concern over persistent inflation and supply chain issues, leading to a more cautious stance.
Key related indicators include the trajectory of South African inflation rates and global commodity price movements, which will likely influence the SARB's policy decisions moving forward.
What the calendar says
...
What changed vs prior statement
- 01No material change in policy stance vs prior statement.
- 02Language essentially preserved across key themes of monetary policy.
- 03No vote-record change.
From the original
Public lecture by Mr Lesetja Kganyago, Governor of the South African Reserve Bank, at Rhodes University, Grahamstown, 4 May 2026.
Related speeches
4 itemsLesetja Kganyago: One crisis after another - shocks, imbalances and resilience in the global economy
Erik Thedéen: Monetary policy challenges in war related supply shocks
The desk posits that the ongoing war-related supply shocks are complicating monetary policy decisions, particularly for the Sveriges Riksbank. Per the full note [source], Governor Erik Thedéen highlighted the difficulties central banks face in navigating inflationary pressures exacerbated by geopolitical tensions. This aligns with our view that the Riksbank may need to adopt a more cautious approach to interest rate adjustments, especially as inflation remains stubbornly high. With consensus targets for EUR/SEK reflecting a range of 1.04 to 1.10, the market is keenly watching for any shifts in policy direction that could impact currency valuations.
Sanjay Malhotra: Monetary policy in a time of heightened uncertainty
Fundi Tshazibana: Regulation and supervision of the financial sector in the age of artificial intelligence
The desk interprets recent remarks by Fundi Tshazibana on AI's regulatory landscape as pivotal for understanding the evolving dynamics of financial markets, especially as it relates to currency stability and bank operations. Per the full note [source], Tshazibana emphasized the necessity for robust regulatory frameworks to guide financial institutions amidst the rapid technological advancements associated with artificial intelligence. This commentary is particularly noteworthy as financial institutions are increasingly exposed to risks related to algorithmic trading and automated decision-making processes. With no high-impact data releases on the horizon, the focus remains on how these regulatory insights may spur shifts in market positioning among institutional traders.
More from BIS SPEECHES
5 items- BIS SPEECHESMay 27, 2026
Sarah Breeden: Modernising money and markets
- BIS SPEECHESMay 27, 2026
Junko Koeda: Economic activity, prices, and monetary policy in Japan
- BIS SPEECHESMay 27, 2026
Sarah Hunter: Inflation and the impact of the Middle East conflict
- BIS SPEECHESMay 27, 2026
Ida Wolden Bache: Research-based models in monetary policy decision-making
- BIS SPEECHESMay 27, 2026
Priscilla Muthoora Thakoor: Current economic conditions and outlook