South Africa officially has a new inflation target
South Africa will have an official new inflation target of 3% following repeated calls from the South African Reserve Bank (SARB).
The SARB has been advocating for a lower inflation target for over a year, arguing that the previous band of 3% to 6% was too wide and made the nation less competitive.
While the SARB’s Monetary Policy Committee (MPC) is responsible for achieving the target, it is actually the Minister of Finance Enoch Godongwana who sets it.
In the latest Medium-Term Budget Policy Statement, Godongwana confirmed that the inflation target is being reduced to 3%.
The target will have a 1 percentage point tolerance band on either side to accommodate normal economic fluctuations.
The new target will be fully implemented over the next two years.
The National Treasury stated that the revised target will benefit all South Africans, particularly poorer households.
The SARB has previously stated that lower inflation will also lead to lower interest rates in the future.
Notably, the SARB was already anchoring its inflation expectations at 3% in its latest MPC meetings when making interest rate decisions, as it was already within the 3% to 6% target range.
Inflation has remained subdued over the last year, with the latest September print sitting at 3.4%.
The MPC are set to meet again next month, with economists expecting a further 25 basis point cut, taking the repo rate to 6.75%.
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