JOHANNESBURG (Reuters) -South Africa’s finance minister said work towards a lower inflation target was advancing but that it should not be rushed, after the central bank again stressed its preference for a lower target at its last interest rate announcement.
Signs that the government could soon announce a lower inflation target, which the finance minister would have to sign off on, have boosted investor confidence and lifted the bond market in recent weeks.
But while South African Reserve Bank (SARB) Governor Lesetja Kganyago has for years advocated for a lower target than the current 3%-6% range, Finance Minister Enoch Godongwana has been more reluctant.
“Work is progressing well on the proposed lower inflation target. … (But) it needs to be clarified that this policy responsibility resides with the Minister of Finance, who sets the target in consultation with the SARB,” Godongwana said in comments in parliament on Tuesday.
“Such decisions should not be taken in haste, without the necessary technical and political engagements that achieve a genuine consensus grounded in a thorough consideration of the social and economic realities.”
The central bank at its May monetary policy announcement released modelling of a lower inflation target of 3%, which it said its Monetary Policy Committee found more attractive than the midpoint of the 3%-6% range it aims for.
Annual inflation was running at 2.8% in May, the latest month for which data is available. The central bank’s next policy announcement is on July 31.
(Reporting by Alexander Winning; Editing by Tomasz Janowski)
