Jacob Zuma, the new leader of the African National Congress (ANC) said on Sunday that he would look at inflation targeting, a key monetary policy tool used by the Reserve Bank to reign in inflation.
South Africa adopted the policy in 2000 as a framework through which the central bank estimates, and makes public, a ”target” inflation rate then aims to steer actual inflation towards the target by increasing or decreasing rates.
”Clearly, our main method of inflation targeting, which is hiking the interest rate, has resulted in complaints from both the top end of the financial spectrum as well as the bottom end,” the Sunday Independent newspaper reported Zuma saying.
”So it stands to reason that there’s some kind of ”problem” there. And though I am not going to pretend that I have delved into the issue properly, it is something that I am going to get to,” Zuma said.
South Africa’s central bank has raised repo rates by a total of 400 basis points since June last year to tame rising inflation pressures.
Critics say the main drivers of accelerating inflation are food and fuel costs largely outside the control of monetary policy.
In his first speech to delegates at a congress that saw him elected as the president of the party, ousting President Thabo Mbeki, Zuma, who was supported by trade unions and the South African Communist Party (SACP), moved to calm fears that there would be a shift in economic policies.
The trade unions and the SACP have criticised the central bank’s determination to tame inflation through interest rates, and have demanded the removal of inflation targets.
However, Central Bank governor Tito Mboweni said in November that keeping inflation low was the best way to help the poor, with price increases affecting them more acutely than the rich.
Mboweni said economic policy, including inflation targeting, was unlikely to change even if there was a change of leadership within the ANC. – Reuters