Finance Minister lowers inflation target to 3% to ease cost of living and boost stability

South African Reserve Bank defends lower inflation target as key to boosting real incomes and spending

- SIPHELELE DLUDLA

FINANCE Minister Enoch Godongwana flanked by SARB Governor Lesetja Kpanyago, SARS Commissioner Edward Kieswetter, and National Treasury director-general, Dr. Duncan Pieterse, walking towards the media centre for a briefing on the MTBPS on Wednesday.

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THE South African Reserve Bank (SARB) Governor Lesetja Kganyago has defended the government's decision to lower the inflation target, saying the move is aimed at protecting the value of money, enhancing consumer purchasing power, and improving fiscal efficiency.

This comes as Finance Minister Enoch Godongwana on Wednesday officially reduced South Africa's inflation target to 3% with a tolerance band of 1 percentage point on either side over the next two years in a bid to ease the elevated cost of living on consumers.

This new target immediately replaces the previous target range of between 3 and 6% with a midpoint of 4.5%, which has been implemented since 2000.

Over the past year, the National Treasury and the Sarb conducted joint research on the benefit of a lower inflation target on the economy and the fiscal framework.

Speaking during an embargoed media briefing before the tabling of the Medium-Term Budget Policy Statement, Kganyago said lowering the inflation target would anchor expectations, enhance predictability in the economy, and ultimately strengthen both household and government spending.