BusinessDay reports that in the biggest monetary policy reform in 25 years, the consumer inflation target that the SA Reserve Bank (SARB) will aim for has been set at 3%, with significant consequences for fiscal metrics such as tax revenue, nominal GDP and government expenditure over the next three years.
Finance minister Enoch Godongwana announced the 3% target – with a one percentage point tolerance band on either side to accommodate nominal economic fluctuations – in the medium-term budget policy statement (MTBPS) tabled in parliament on Wednesday. The new 3% target – strongly fought for by SARB governor Lesetja Kganyago – is the lower end of the previous 3%-6% range, which was set in February 2000. The bank has aimed at the midpoint of 4.5% since 2017. SARB is expected to guide inflation and inflation expectations gradually towards the 3% target over the next two years.
Commenting on the decision to set the target at 3% – which he stressed was a joint one between himself and Godongwana – Kganyago said: “There is no such thing as a costless policy. Every policy has trade-offs, and what is important is that the benefits outweigh the costs.” He added that the previous inflation target band had been too wide and too high, while the 3% target was closer to that of SA’s peers.
- Read the full original of the report in the above regard by Linda Ensor at BusinessDay (subscriber access only)
- Read too, Finance minister confirms inflation target at 3%, at Moneyweb
- En ook, Inflasieteiken verlaag, by Maroela Media
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