In Johannesburg, South Africa's two most powerful economic stewards have found common ground on a question that once divided them publicly: the country's inflation target must come down. Reserve Bank Governor Lesetja Kganyago and Finance Minister Enoch Godongwana, having weathered a rare and visible rupture in their coordination, now stand aligned on direction — if not yet on timing. The resolution carries weight beyond bureaucratic procedure, for in the space between their disagreement and their reconciliation, markets have already begun to move, the rand has firmed, and the cost of borrowing
South Africa's central bank and treasury agree on lower inflation target, debate timing
There isn't a disagreement about lowering the target; it's a question of timing.
Mark
So they agree the target should be lower, but they're still arguing about when. That sounds like they're not actually aligned at all.
Mimi
Not quite. The disagreement in July was real—Kganyago announced a shift without telling Godongwana first. But now they've met and decided the direction is right. The timing question is different. It's about logistics and communication, not principle.
Luke
But we don't know what "as soon as it's practically possible" actually means. Days? Months? And we don't know what the loose ends are. The statement is deliberately vague.
Mimi
True. But Kganyago did say they're working hard on it. The fact that they issued a joint statement at all, after the July blowup, suggests they're serious about moving together.
Mark
Why does timing matter so much? If they both want a lower target, why not just do it?
Mimi
Changing an inflation target affects how markets price everything—bonds, currency, expectations. You need to coordinate with the treasury so fiscal policy aligns. You need to explain it clearly so people don't think the central bank is losing control.
Luke
And we should note: the lower target hasn't been formally adopted yet. What's happened is the market has started pricing in that expectation, and that's already moved the rand and borrowing costs. So the effect is real even though the formal change hasn't happened.
Mark
So Kganyago got what he wanted—lower inflation expectations—just by saying it?
Mimi
Partly. But it created a credibility problem because he said it alone. Now they're trying to formalize it in a way that shows both institutions are behind it.
Luke
And we should be clear: we don't know if the 80-to-160 basis point drop in borrowing costs is entirely because of inflation expectations, or if other factors played a role. Kganyago is attributing it to the shift, but that's his interpretation.
Mark
What happens if they can't agree on timing?
Mimi
That's the risk. If they stay publicly divided, markets lose confidence. But they've already said they're aligned on the direction, so they have an incentive to resolve it.
Luke
The real test is whether they actually announce a new target, and when. Until then, this is still just two officials saying they're working on it.
El Pulso
- A public clash between South Africa's central bank governor and finance minister had rattled confidence in the country's monetary and fiscal coordination, exposing a rare and damaging rift at the top of economic policymaking.
- Kganyago's unilateral July announcement that the SARB would effectively target 3% inflation — without Treasury alignment — blindsided Godongwana and sent an unsettling signal to markets about institutional cohesion.
- Both officials have since met, acknowledged the communication failure, and directed their teams to resolve the remaining procedural and mechanical details of formally lowering the target.
- Markets have not waited for the paperwork: since April, the rand has strengthened and benchmark government borrowing costs have fallen by 80 to 160 basis points, easing pressure across the broader economy.
- The finish line remains undefined — officials have committed to act 'as soon as practically possible,' but no date has been set, leaving implementation details still to be tied down.
In Johannesburg, South Africa's two most powerful economic stewards have found common ground on a question that once divided them publicly: the country's inflation target must come down. Reserve Bank Governor Lesetja Kganyago and Finance Minister Enoch Godongwana, having weathered a rare and visible rupture in their coordination, now stand aligned on direction — if not yet on timing. The resolution carries weight beyond bureaucratic procedure, for in the space between their disagreement and their reconciliation, markets have already begun to move, the rand has firmed, and the cost of borrowing has quietly eased — a reminder that confidence, once shaken, can also be restored.
South Africa's central bank and finance ministry have resolved their most public disagreement: both now agree the country's inflation target must be lowered. What remains open is when.
Speaking to lawmakers in Johannesburg on Thursday, Reserve Bank Governor Lesetja Kganyago confirmed that he and Finance Minister Enoch Godongwana are aligned on direction. The tension between them had become impossible to ignore after Kganyago announced in July that the SARB would effectively target 3% inflation — a departure from the official 3-to-6% band — without first securing Treasury agreement. Godongwana responded with a public rebuke, calling it a 'unilateral announcement.' A joint statement followed, but the damage to perceptions of their coordination had already registered.
On Thursday, Kganyago acknowledged the bank's communication had misfired. He and Godongwana had since met and tasked their teams with resolving the outstanding details. Their eventual joint statement deliberately avoided naming an implementation date, committing only to move 'as soon as it's practically possible.' Behind the scenes, he said, officials were working to close what he called 'loose ends.'
Kganyago has long argued that South Africa's current inflation band leaves Africa's largest economy uncompetitive globally, and that a lower, more stable inflation environment is essential for investment and growth. Markets appear to agree: since April, the rand has strengthened and the cost of government borrowing on benchmark bonds has fallen by between 80 and 160 basis points. 'When the cost of borrowing for the government comes down, the cost of borrowing for everybody else also comes down,' he told lawmakers.
The remaining work is procedural but consequential — requiring careful coordination and communication to avoid unsettling the very confidence the two officials have worked to rebuild.
South Africa's central bank and finance ministry have settled their most visible disagreement: both now accept that the country's inflation target needs to come down. What remains unresolved, though, is when.
Lesetja Kganyago, governor of the South African Reserve Bank, made this clear on Thursday while addressing lawmakers in Johannesburg. The central bank and National Treasury, he said, are aligned on the direction. The friction now is purely about timing—about when to formally lower the target and how to communicate that shift to markets and the public.
This represents a significant thaw in what had been a notably tense relationship. In July, Kganyago had announced that the SARB would effectively target 3 percent inflation, departing from the official 3-to-6 percent band that Finance Minister Enoch Godongwana had set. The move caught markets off guard and, more importantly, caught Godongwana off guard. He publicly rebuked Kganyago for what he called a "unilateral announcement," a rebuke that signaled real daylight between two officials who are supposed to coordinate on monetary and fiscal policy. The two later issued a joint statement suggesting they were in fact on the same page, but the damage to confidence in their coordination had been done.
On Thursday, Kganyago acknowledged that the bank's communication had misfired. He and Godongwana had met, he said, and instructed their teams to resolve the outstanding details. "There isn't a disagreement about the lowering of the target; it's a question of timing," he told lawmakers. The joint statement they would eventually release, he noted, deliberately avoided naming a specific date for implementation, instead committing only to move "as soon as it's practically possible." Behind the scenes, he said, officials were working hard to tie down what he called "loose ends."
Kganyago has been pushing for a lower inflation target for years. He argues that the current band makes South Africa, Africa's largest economy, uncompetitive on the global stage. A lower, more stable inflation environment, in his view, is essential for attracting investment and supporting growth. The shift in expectations around inflation has already begun to move markets. Since April, when the direction became clearer, the rand has strengthened and the cost of government borrowing on benchmark bonds has fallen by between 80 and 160 basis points. That matters beyond the government's balance sheet. "When the cost of borrowing for the government comes down, the cost of borrowing for everybody else also comes down," Kganyago said.
The remaining work is procedural but not trivial. Changing an inflation target is not simply a matter of announcement. It requires coordination between the central bank and the treasury, alignment on the mechanics of implementation, and careful communication to avoid spooking markets or undermining confidence in either institution. The two officials have now committed to finishing that work, though they have not said how long it will take.
Citas Notables
There isn't a disagreement about the lowering of the target; it's a question of timing.— Lesetja Kganyago, SARB Governor
When the cost of borrowing for the government comes down, the cost of borrowing for everybody else also comes down.— Lesetja Kganyago, SARB Governor
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