Reserve Bank prefers 4,5%
The South African Reserve Bank (SARB) is not comfortable with the public’s expectations that the country’s inflation rate may increase to around 6% and would prefer to see inflation anchored closer to 4,5%, being the midpoint of the inflation target range. This was the message of Lesetja Kganyago, SARB Governor during the SARB’s six-monthly Monetary …
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The South African Reserve Bank (SARB) is not comfortable with the public’s expectations that the country’s inflation rate may increase to around 6% and would prefer to see inflation anchored closer to 4,5%, being the midpoint of the inflation target range.
This was the message of Lesetja Kganyago, SARB Governor during the SARB’s six-monthly Monetary Policy Review session that was hosted at Sun Meropa last Wednesday evening. Kganyago was accompanied by Josina Solomons, Senior Economist for Policy Analysis and Theo Janse van Rensburg, Divisional Head of the Policy Analysis Unit and guests from the financial and business sector attended.
Kganyago said that the primary mandate of the SARB is to achieve and maintain price stability in the interest of balanced and sustainable economic growth and that it has a complementary mandate to oversee and maintain financial stability. “Price stability helps to protect the purchasing power and living standards of all South Africans. It provides a favourable environment for investment and job creation and also helps to maintain and improve international competitiveness. The goal of price stability is quantified by the setting of an inflation target range after consultation with government,” Kganyago explained.
Inflation is measured by defining a basket of goods and services used by a typical consumer and then keeping track of the changes in the cost of that basket. Statistics South Africa is the official compiler of the consumer price index(CPI) which is the measure of inflation.
“Sustained inflation outcomes close to the middle of the 3-6% target range will contribute to broader microeconomic stabliity. Inflation of about 4,5% will also help with the cost of living and, by bringing the domestic inflation rate closer to that of our trading partners, improve competitiveness over the long term,” Kganyago said.
Kganyago added that actual inflation outcomes have been below the midpoint in some recent months. “It is too soon, however, to claim that inflation is already permanently lower. A large part of the improved inflation performance recently is due to positive shocks such as low food price inflation, a broadly flat exchange rate trend over several years and a lower level of world oil prices and general global inflation,” Kganyago said.
Story and photos: BARRY VILJOEN
>>barryv.observer@gmail.com
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