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

The South African Reserve Bank’s (SARB) recent push to lower the country’s inflation target has sparked an important debate about South Africa’s economic future. While the proposal may appear sound on the surface, a deeper analysis reveals that lowering the inflation target could damage the country’s fiscal health and economic growth prospects, particularly when our economy remains vulnerable.

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.

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