By Thebe Mabanga
Finance Minister Enoch Godongwana has rejected the SA Reserve Bank’s announcement that it is to adjust the inflation target to 3%.
Following the Monetary Policy Committee (MPC) meeting this week where the bank cut the repo rate by 0,25%, Reserve Bank Governor Lesetja Kganyago announced that it would now now use 3% as its inflation target.
Godongwana has hit back at this, stating that he has no intention to do so, and that proper consultation has not taken place.
“As a result of this announcement, an expectation has been created that the Minister of Finance will make an announcement at the Medium-Term Budget Policy Statement (MTBPS) confirming this move to a 3% target. Minister Godongwana has no plans to do this.” the National Treasury said in a statement on Friday.
“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).”
Godongwana said no such consultation has taken place.
South Africa adopted inflation targeting in February 2000 at a range of 3 % to 6%. Inflation has consistently been below the mid-point of the target range of 4,5 % for the past year and is expected to stay there for the short to medium term.
Around 2017, the Bank announced an intention to use the mid point of the target range as its guide, now it appears to have moved it to the lower end of the range.
A significant modification to the policy happened under the late finance minister Pravin Gordhan who, in 2010, wrote to the then Reserve Bank Governor Gill Marcus and issued a directive for a more flexible mandate and allow for deviation from the target due to shocks and to also focus on growth and employment.
INSIDE POLITICS