MARIAM ISA, Johannesburg | Friday 9.45am.
ANALYSTS say the country’s newly introduced inflation targets are both realistic and achievable, despite calls from business to relax them to reduce the risk of rate hikes.
All twelve economists responding to a straw poll on the issue said that they believe the government will reach its aim of reducing inflation to between 3% and 6% by 2002.
Despite increasing price pressures, they are adamant that the target should not be changed because of the big blow it will give to South Africa’s hard-won financial credibility.
Many are also deeply critical of a call from the South African Chamber of Business on Wednesday to adjust the target upwards to reflect recent currency volatility and steep global oil prices, which have fuelled higher domestic inflation.
Its plea to lift the inflation target range to between 5% and 8% fanned fears that the central bank will miss its goal and triggered a setback for the recovering rand, along with benchmark bond yields.
”I’m beside myself with anger because they have done us a tremendous disservice…It’s shooting from the hip and it’s utterly irresponsible because it’s damaging inflation expectations,” SG Securities economist Nico Czypionka said.
Others echo these views, saying they believe that two years are plenty of time for the bank’s targeted measure of inflation, known as CPI-X, to fall into range, particularly if oil costs and domestic prices stabilise as expected.
CPI-X, which strips out the impact of changes in home loan costs, rose by 7,8% in the year to April.
Meanwhile Reserve Bank Governor Tito Mboweni said on Thursday that he is determined to meet inflation targets.
”There are some exogenous circumstances making it very difficult for us to reach our target, but we are determined to reach it,” Mboweni told a forum of business and government officials in Durban. — Reuters