SARB Governor Advocates Lower Inflation Target

South African Reserve Bank Governor Lesetja Kganyago has advocated for a lower inflation target, proposing a shift from the current 3% to 6% range to enhance price stability for South Africans. During a lecture at Stellenbosch University, he emphasized that a lower target, akin to those of South Africa's peers, could be achieved at little cost, as seen when the target was adjusted to 4.5%. Kganyago noted that the current inflation, though improved to 4.4% in August, remains relatively high and that a lower target could help achieve permanently lower inflation and interest rates. He argued that the existing target is misaligned with emerging market norms and serves to anchor inflation expectations higher than desired. The SARB's focus on a 4.5% midpoint since 2017 has proved effective in managing inflation without adversely affecting economic growth. Kganyago hopes for a decision on this adjustment before 2025.