No plans to lower the current inflation target: National Treasury

Minister of Finance, Enoch Godongwana says National Treasury has no plans to lower the current inflation target. This after the SA Reserve Bank announced that it will start targeting the 3% inflation target and not 4,5% mid-point under the 3 to 6% range.

In a statement, Godongwana says it’s important to clarify his position on this issue due to certain expectations that have been created.

According to the statement, the minister has no intentions to confirm the move to a 3% target at the next Medium-Term Budget Policy Statement (MTBPS).

The statement says that it is well-established that policy making responsibility in this area resides with the Minister of Finance, working with the President and Cabinet, who sets the inflation target in consultation with the South African Reserve Bank (SARB).

It added that the Reserve Bank then operates independently in its pursuit of the inflation target.

Godongwana says, in the statement, any adjustments to the inflation-targeting framework will follow the established consultation process and not unilateral announcements that pre-empt legitimate policy deliberation.

Reserve Bank Governor, Lesetja Kganyago, earlier this week, announced that the Monetary Policy Committee (MPC) had decided to cut the repo rate by 25 basis points to 7%. This means that the prime lending rate dropped to 10,5%.

The MPC had also cut the repo rate by 25 basis points at the last meeting.

Kganyago earlier this year said the Reserve Bank’s fight against inflation was starting to yield positive outcomes, bringing about relief for consumers facing economic pressures.