(Bloomberg) -- South African Reserve Bank Governor Lesetja Kganyago warned that US protectionist policies could fuel inflation and risk derailing future interest-rate cuts, adding that there are currently too many “moving parts” to be certain about the outlook.

Donald Trump, who was sworn in as US president on Monday, said he plans to impose previously threatened tariffs of as much as 25% on Mexico and Canada by Feb. 1, dampening market optimism.

“To the extent that the measures taken are inflationary, it could slow down the disinflation process that the central banks had so steadfastly worked on since the great inflation of 2022,” Kganyago said in an interview with Bloomberg TV at the World Economic Forum in Davos on Tuesday. There is a risk that “the reduction in the restrictiveness of monetary policy that we had seen over the past year could then be brought to an abrupt halt.”

Central banks including those in the US, the European Union and South Africa began lowering rates last year as inflation started easing. However, other proposed policies, such as trade tariffs on imports from China, could create ripple effects for emerging markets like South Africa.

“Trade wars could weaken global growth and pressure the rand, but aggressive Chinese economic stimulus could benefit South Africa as a key commodity exporter,” Maarten Ackerman, chief economist at Citadel Investment, said in an emailed note.

The central bank’s monetary policy committee cut the benchmark interest rate by 25 basis points for a second straight meeting in November — to 7.75% — and is set to announce its next decision on Jan. 30. Forward-rate agreements are pricing in a 10 basis-point reduction in the repo rate next week, and 31 basis points in total this year.

Risks to the central bank’s inflation outlook include higher domestic energy prices and a weaker rand. The rand, a bellwether for emerging-market currencies, has depreciated almost 7% against the dollar since Trump won the US election on Nov. 5. The rand was among the worst performing EM currencies on Tuesday, declining 0.63% against the dollar as of 1:06 p.m. in Johannesburg.

Its weakness has been linked to a global pullback from emerging markets, fueled by US tariff threats and reduced expectations for Federal Reserve rate cuts. Inflation, geopolitical uncertainties and other factors could lead the central bank to adopt a similar stance.

A move by the SARB to leave its policy rate unchanged despite low inflation readings could benefit the rand, which will be one of the top performers in EM this year, said Marek Drimal, a strategist at Societe Generale SA.

Still, Kganyago said a good crop output after heavy rains may have a dampening effect on food costs going forward, easing price pressures. “We have got to continuously assess the balance of risk and calibrate policy accordingly,” he said.

Annual inflation data, set for release on Wednesday, is expected to show cost increases accelerated to 3.2% last month from 2.9% in November to average 4.5% in 2024, in line with the MPC’s forecast and at the midpoint of the bank’s target range. Policymakers foresee inflation averaging 4% this year.

--With assistance from Rene Vollgraaff and Rivaldo Jantjies.

(Updates with market moves in 6th and 7th paragraph, market quotes.)

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