Second-round effects are the central-bank phrase for a simple problem: a temporary price shock becomes more durable when businesses raise prices because they expect costs to keep rising, and workers seek higher pay because they expect living costs to stay elevated. Once that loop starts, inflation becomes harder to bring back to target without weaker demand.
Bloomberg reported that Kganyago said the central bank must act when inflation expectations rise, framing the risk as persistence rather than a single imported-price shock. SARB's May monetary-policy statement said the Monetary Policy Committee increased the policy rate by 25 basis points to 7.00%, effective from 29 May. Statistics South Africa said consumer inflation rose to 4.5% year on year in May from 4.0% in April.
The target has also become sharper. South Africa's National Treasury announced in November 2025 that the country had moved to a 3% inflation target with a one-percentage-point tolerance band. SARB's May statement said the bank expected inflation to return to the 3% target in 2028 and described the policy decision as aimed at preventing higher inflation from becoming entrenched.
Table: official data behind the SARB's persistence question
| Indicator | Latest cited value | Comparator or context | Source |
|---|---|---|---|
| Policy rate | 7.00% | 25bp increase effective 29 May 2026 | SARB |
| Consumer inflation | 4.5% y/y in May 2026 | Up from 4.0% in April | Statistics South Africa |
| Inflation target | 3% +/- 1 percentage point | Announced in November 2025 | National Treasury |
| Professional-group expectations | 3.6% in Q1 2026 | Down from 3.7% previously | BER |
| Household one-year expectations | 5.4% in Q1 2026 | Up from 5.3% previously | BER |
| Household five-year expectations | 8.4% in Q1 2026 | Up from 7.7% previously | BER |
Source: South African Reserve Bank, Statistics South Africa, Bureau for Economic Research and National Treasury.