South Africa was better off with using inflation targeting as an instrument of monetary policy, the governor of the South African Reserve Bank (SARB) said on Tuesday.
”Let’s stick to it for now,” Tito Mboweni told a gathering of Wits students.
He said while there were those who argued that alternative instruments could be used to fight inflation, these instruments — such as forcing banks to increase their reserves — weren’t useful.
Mboweni said that lately, there had been calls to abandon inflation targeting.
”But that’s because rates are high — when rates were low, no one called for inflation targeting to be shelved.”
Mboweni said he didn’t blame the public for complaining that monetary policy had become tighter.
”But I urge you not to suggest abandoning inflation targeting.”
If this instrument were abandoned, any central bank would still pursue low inflation — but it would then have an internal target.
”And thus you wouldn’t be able to hold the central bank responsible,” Mboweni said.
He added that the SARB’s Monetary Policy Committee was ”very worried” about current high inflation.
”We must all do our bit to bring inflation down to the target range in the medium term,” Mboweni said.
The SARB’s current target for inflation is set at CPIX of 3% to 6%. – Sapa