Finance Minister Trevor Manuel on Tuesday defended inflation targeting as an economic management tool and hinted the government was still comfortable with a 3% to 6% percent target range for the main CPIX (consumer inflation less mortgage costs) gauge.
”I think we would be on the same page with the central bank in saying that … given the peculiarities of South Africa, a country with low savings, low reserves, as a measure, inflation targeting is without equal for now,” Manuel told Parliament’s finance committee.
CPIX consumer inflation has stayed above the 3% to 6% band since April 2007, touching a five-year high of 10,1% in the year to March.
The central bank has lifted interest rates by 450 basis points since June 2006 in a bid to bring the measure down.
”When we set the band we took it on good advice. It was not an accident, it wasn’t to impose punishment,” Manuel said.
Last week South African Reserve bank Governor Tito Mboweni said continuing inflationary pressures left no room to cut South African interest rates, saying if any move were appropriate at present, it would be a rise.
The central bank’s monetary policy committee, which decides on interest rates, next meets on June 11 and 12.
Some analysts and labour unions have criticised the central bank’s interest-rate hikes, saying the monetary authorities might be focusing too much on inflation targeting at the expense of economic growth. — Reuters