Godongwana awaiting inflation-targeting report
Finance Minister Enoch Godongwana said he is waiting for a report on the country’s inflation-targeting dispensation and he hasn’t decided whether it should be adjusted.
“I do not have any views at the moment,” Godongwana said in an interview in Cape Town on Wednesday. “All I do know is that there is a standing committee between ourselves and the Reserve Bank, and one of the matters they are discussing is the level of the inflation target. In the absence of a report tabled before us, we can’t form an opinion.”
The central bank’s 3% to 6% inflation target hasn’t been changed since it was introduced in 2000. Its governor, Lesetja Kganyago, favours shifting to a single-point target and has said that aiming for 3% would lead to lower interest rates than otherwise would be the case.
South Africa’s annual inflation rate was less than 3% in March and April, and the central bank last week said expects it to average 3.2% this year and 4.2% in 2026. The bank aims to anchor inflation expectations around the midpoint of its target range
Godongwana didn’t specify when he expects the panel that is reviewing the framework to complete its work.
“Once we get that report we will form an opinion and issue the appropriate statement,” he said.
S&P Global Ratings Director Ravi Bhatia said a lower target would be good for South Africa’s economy and government finances.
“The benefits from a rating point of view would primarily be the cost of government borrowing would go down and the cost of credit in the wider economy would go down, which would mean faster growth and more investment,” he said at a conference in Johannesburg on Wednesday. A lower target would also help bring down interest rates over the medium and long term, he added.
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