South Africa's Treasury Department said there was a case for a review of the central bank's inflation target, given the negative impact that increased competitiveness and price increases would have on the poor.
The central bank has been pushing for a lower target range for several years, with its current target range of 3% to 6%, prioritizing inflation at the midpoint. Governor Lesetja Kganyago has repeatedly stated that the single-point inflation target of 3% is in line with South African countries, allows for low interest rates, and at the same time alleviates South Africans' concerns about rising prices in their daily lives.
The Treasury says that while the central bank has been able to achieve its goals of price stability and anchoring inflation expectations, the current definition of the goal is questionable given the gap in inflation rates with peers and trading partners. It showed.
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In its Macroeconomic Policy Review published on Wednesday, the department said: “The appropriate level of inflation targeting in South Africa's current global and domestic economic conditions and what form such a target should take (points or ranges) “Technical work on whether or not to do so should continue.” In conjunction with the 2024 budget proposal. “All future decisions must be evidence-based and communicated in a transparent manner.”
He also said the central bank should discuss more clearly the impact of fiscal policy on inflation and growth expectations. The central bank has repeatedly said fiscal slippage is a risk to achieving lower inflation.
At its rate-setting meeting last month, the central bank decided to keep borrowing costs at 8.25%, the 2009 high level, for the fourth consecutive time, citing lingering inflation risks. Inflation in January was 5.3%, above the midpoint for the first time in nearly three years.
The Monetary Policy Committee will announce its next interest rate decision on March 27th.
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