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00:00Inflation was higher than expected. I know you've tried to. You don't like the word front loading but actually you've been on top of these inflationary pressures for quite some time. Are you worried that inflation now will go significantly higher than we had been worried about inflation from and from last year. Monetary policy now is its risk based. And so as early as November last year we took a view that inflation is going to rise. We expected that it will be outside of our target in the second quarter of this year. We we thought that it will go out to six point three came out at six point five which was slightly higher than what we had expected. But there is no doubt that inflation around the world is there is rising. And we had to start recalibrating policy as early as in November last year. We were initially moving at least of 25 basis points. Then we moved on to a 50 basis points and a new way. We do not even see it so much as a slamming of the brakes or if I was to use the analogy of a motor vehicle. It is more like taking a foot off the accelerator than slamming on the brakes. Do you have to accelerate actually some of those hikes. I think the market is pricing a 75 basis point hike this year. Well our baseline scenario which is captured in the quarterly projection model of the Reserve Bank the forecast for this year is for 25 25 Shery Ahn to five over the course of the remaining three meetings of the year. That is a date that is just that is just a broad guideline. We can deviate from that. And actually we did deviate from that in the previous meeting and decided to do to do 50 basis points. We are in uncertain uncertain environment that becomes important but you can't wait until you see concrete evidence that second round effects are kicking in. You're going to have to take a view about the likelihood of the second round effects kicking in and thus acting. So first of all. So you're suggesting it seems that actually a 50 basis point hike is maybe more likely than 25 25 25 just to kind of really nip it in the bud. It's definitely not off the table. We did 50 basis points at the previous year at the previous meeting. We would look at the data as we go into our policy meeting in July and we would act and we would act appropriately. And I think that the fact that we have been able to act earlier gives us the space to move at a at a measured Peter. But that as I had said does not take that 50 basis points off the table. So are you worried that developed economies basically because they didn't start as quickly as you or to hike rates now have to be more aggressive and will push the world into recession. When I'm looking forward to the discussion of the developed economies this afternoon so that I can get an insight from what they are seeing. I've got no doubt central bankers around the world are much more familiar with their own economies than most people. Most people are. What is in no doubt is that inflation is place where most of us on the upside and policy would have to be recalibrated so that we could actually do with inflation going forward. The concern for us yet would be if inflation expectations become deep and cut back. That is plus it is absolutely the central banks act with speed. Is that a real possibility once it starts circulating in public domain. I know you are faced also with external shocks but you see the price of cold cuts at Lake Mead going up its oil. It's things that are out of your control. You know I like hearing this narrative. These are things out of our control. So inflation is yet. We've got to deal with it. When I think of things that are outside of our control or not what that you are starting to see other places right. Yes. Beyond in the year to year inflation was amazing. Before we had the shock of the war in Ukraine inflating month exit was leaving the region. But if this is outside your control so if this is a supply shock what can central banks actually do to keep to keep output. Well not only when they say supply shop you try to see through it and see whether there is any middle of second round effects kicking in. What do you are having now is a multiplicity of shocks. And when you have a multiplicity of shocks there is a risk then that the inflation rises could be persistent and that failure to act would actually result in higher costs to the economy than having to extra deal with inflation. And when you look at the central bank universe you could actually see that central bankers have already started to absorb of unseen that well. These are supply shocks is beyond our. I mean that just sounds like a feeling helpless. But you have got the tools we have got to be able to act. But will they be able to act. I mean do you feel like central banks around the world the Fed now the Bank of England ECB yourself have the tools have the power. After 10 years of what we had in terms monetary policy to keep inflation under control it's much easier for central banks to deal with inflation than to deal with deflation. And and the evidence is there for us and our tools are actually much more effective in having to deal with it with inflation. And I think that we have seen this since. I think of all of the central banks that you have mentioned they either extend or have indicated that they would be acting against inflation. And I think that is the appropriate thing to do for it. Are you seeing these inflationary pressures in South Africa starting to hurt consumer demand. They have been hit to consumer income and and and we have had to have this conversation with South Africans and see that we are concerned that inflation will erode the income of working of working people. And that a central bank with a price stability mandate have got to act and deal with a rise in inflation. And we started it as November last year and we will continue to be vigilant in assessing the balance of risks and act as appropriate. Should we have a lower inflation target. I mean I know that's something that you've pushed for in the past right. Does it actually make a difference in this kind of environment. You know knowing that you have got a central bank that is committed to lower inflation is exactly what gets the place. That has to know that if they do not have to be limping up places because that is a central bank that would be and that would be if we had started this conversation. Is the case for us to take a look at. Inflation is extremely very strong. And we have previously made this this assessment. And I think that we might have made a mistake in 2002 when we experienced a shock and we decided to restate a higher target instead of sticking to the lower target if inflation rises. As you said because of shocks. The important thing to see is yes inflation is rising as a result of these shocks. But we are acting to deal with inflation. And because we are seeking to deal with inflation we expect that we will not stall place stability once again.

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SARB’s Kganyago: 50-Bps July Rate Hike ‘Not Off the Table’

South African Reserve Bank Governor Lesetja Kganyago says the central bank “can deviate” from their baseline forecast as he discusses policy steps to combat inflation concerns. He speaks with Francine Lacqua on "Bloomberg Markets: European Open" on the sidelines of the ECB Forum on Central Banking in Sintra, Portugal. (Source: Bloomberg)

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