SARB Governor Proposes Lower Inflation Target

Lesetja Kganyago, the governor of the South African Reserve Bank, is advocating for a review of the country's inflation target, which he argues is 'out of sync' with those of other emerging markets. With inflation easing to 3.8% in September, Kganyago highlighted that the current target of 3% to 6% has not been updated since its inception in 2000, leading to higher average inflation than peers. He noted that recent economic data suggests a potential lowering of the target to around 4%, aligning closer to global standards, as other nations operate with targets closer to 2%. Kganyago emphasized that this shift could enhance South Africa's competitiveness in the global market, despite concerns from labor unions and political opposition regarding potential impacts on economic growth. The Reserve Bank is collaborating with the Treasury to explore this change further, as economists predict sustained low inflation levels through 2025. Ultimately, Kganyago believes a lower target could stabilize inflation expectations without sacrificing economic growth.