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Sarb governor makes case for inflation ‘point target’

Of around 3% or 4% with a margin of error either side, as opposed to a 3% to 6% target range used currently.
Image: Moneyweb

South Africa’s central bank governor made the case on Wednesday for adopting an inflation “point target” of around 3% or 4% with a margin of error either side, as opposed to the 3% to 6% target range used currently.

Lesetja Kganyago said that having a clearer target would help anchor inflation expectations and prevent “target drift,” which he said had happened before when the current range became interpreted as a 5.9% target.

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“A more appropriate target would be a point target of around 3% or 4%, putting us in the same territory as our peers,” Kganyago said, appearing to refer to other middle-income countries.

“It would be useful to bracket the point target with an error range: probably plus or minus 1 percentage point,” he said during a virtual address on inflation-targeting at Stellenbosch University.

South Africa saw inflation collapse in 2020 to near 2%, its lowest in more than 15 years, after the government shuttered much of the economy to contain the spread of the coronavirus.

That allowed the South African Reserve Bank (SARB) to slash interest rates by a cumulative 300 basis points last year to a record low of 3.5% to support the economy.

Annual consumer inflation has since crept up to 4.6% in July , the latest month for which data are available. But the bank has kept monetary policy accommodative, leaving the repo rate on hold for the past six meetings.

South Africa chose the 3%-6% target band when it adopted its inflation-targeting framework in 2000, and had planned to shift it down to 3%–5% by 2004 and 2%–4% later.

But Kganyago said the SARB “lost its nerve” in 2001 when the rand depreciated during the Argentine crisis, in what he called a big mistake because it entrenched higher inflation and inflation expectations.

The governor said the SARB had managed to get inflation expectations from the top of its target range to around the 4.5% midpoint, but that 4.5% was not an optimal goal.

South Africa should benchmark itself against countries that had achieved lower average inflation rates, he said, adding: “Good policy is about making progress, not just holding the line and fending off crises.”

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… but Governor….. u dudes at the Reserver bank are using the wrong data…. your inflation figures are skewed…..

Skewed inflation …. –> skewed policy

Duh!

But you guys are the cause of inflation or at least part their of, it’s called Expropriation Through Inflation. Turn on those money printing machines and watch what happens…

https://fspinvest.co.za/articles/investing/what-expropriation-through-inflation-means-for-you-8452.html

Capital Gains Tax is a tax on inflation because most capital gains result from the process of inflation. The government controls the process of inflation through the “printing press”. This is how the government manufactures tax revenue. CGT is the same as expropriation without compensation. It is confiscation of capital, not of profit.

End of comments.

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