South Africa’s inflation outlook remains favourable for the next two years, South African Reserve Bank (SARB) Governor Tito Mboweni told investors on Wednesday.
”Most analysts and economic commentators, including the SARB, expect CPIX inflation [consumer price index less mortgage costs] to remain within the inflation target range over the next two years,” he said.
”Inflation is projected to accelerate moderately in the course of 2004 to levels close to the upper limit of the inflation target, followed by somewhat slower rates of increase during 2005.”
A pickup in economic growth during 2004 and 2005 should go with the projected improved inflation performance, Mboweni said in a text prepared for delivery at an international investor conference at Sun City in the North West.
Inflation target in South Africa is set between 3% and 6% until 2006. For the year 2003 as a whole CPIX inflation averaged 6,8%, Mboweni said.
The consistent application of the inflation-targeting policy succeeded in bringing inflation down to the target range as now defined by the government.
”It can … be stated that the introduction of inflation targeting in South Africa has been a big success,” Mboweni said.
The inflation target was originally specified as an average annual rate of increase of between 3% and 6% in the CPIX for the years 2002 and 2003.
In November 2003 it was decided to terminate the annual average specification because it complicated carrying out the inflation-targeting framework.
It was replaced by a continuous target of 3% to 6% for the period beyond 2006.
”In other words, the target is specified as an inflation rate of between 3% and 6%, which must be obtained continuously over a 12-month period in the coming years.”
Mboweni said inflation projections were vital in determining monetary policy because changes in policy measures should always be based on likely future price developments. — Sapa