Lowering of the inflation target could damage SA’s growth prospects

The Bank’s argument is straightforward: First, they contend that South Africa’s relatively high inflation is merely a policy choice, not an inevitable feature of our economy. To support this, they point to Chile, which adopted inflation targeting in 2000 (the same year as South Africa), but chose a lower three percent target and achieved better price stability.

Second, they argue that the evidence of the post-Covid inflation spike is that people strongly dislike inflation and would prefer price stability.