Keeping South Africa\u2019s inflation target at the current range will be costly for the government, according to central bank chief Lesetja Kganyago, who has long been an advocate of lowering the objective.<\/p>\n\n\n\n
\u201cKeeping inflation where it, is or allowing it to get higher, means that government is going to pay more in debt-service costs, and so the cost of the higher inflation target is not insignificant,\u201d Kganyago said at a South African Reserve Bank conference in Cape Town on Thursday.<\/p>\n\n\n\n
South Africa adopted its current 3% to 6% inflation target in 2000 and it has not been revised since. Policy makers aim to peg inflation expectations at the midpoint of the range and are currently beating their goal, with annual inflation in February running at 3.2%.<\/p>\n\n\n\n
Kganyago is a longstanding advocate of shifting to a lower target, arguing this would make the nation better placed to compete with its trading partners. A single-point target of 3% would be in line with South Africa\u2019s peers and lead to lower interest rates in the long term, he has previously said.<\/p>\n\n\n\n
But critics worry that reaching a lower inflation target would require tighter monetary policy that would cost growth and employment, in a country with one of the highest jobless and poverty rates on earth.<\/p>\n\n\n\n
\u201cI hear people talking about the sacrifice ratio on how much are we giving away on output,\u201d Kganyago said. That argument is \u201cbased on this wrong premise that somehow we can just grow our way out of our fiscal problems,\u201d he said.<\/p>\n\n\n\n
\u201cWe probably might not be growing because the cost of capital in this economy is high,\u201d which in turn is choking economic activity, Kganyago said.<\/p>\n\n\n\n
Finance Minister Enoch Godongwana has argued that more work needs to be done to obtain political backing for revising the inflation goal, which is set by the Finance Minister in consultation with the central bank.<\/p>\n\n\n\n
He\u2019s also cautioned that such a move could be premature for a developing nation like South Africa that needs to make massive investments to upgrade its frayed infrastructure and spur economic activity.<\/p>\n","protected":false},"excerpt":{"rendered":"
Keeping South Africa\u2019s inflation target at the current range will be costly for the government, according to central bank chief Lesetja Kganyago.<\/p>\n","protected":false},"author":59,"featured_media":817298,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[2922,8927,3619],"class_list":["post-818557","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","tag-interest-rates","tag-lesetja-kganyago","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/818557","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=818557"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/818557\/revisions"}],"predecessor-version":[{"id":818558,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/818557\/revisions\/818558"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/817298"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=818557"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=818557"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=818557"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}