South Africa’s newly appointed Deputy Minister of Finance, Nhlanhla Nene, endorsed inflation targeting on Thursday, going against the leftist voices in the African National Congress (ANC).
”[Inflation targeting] is an anchor of monetary policy,” he told the Financial Mail magazine in an interview. ”It is important that we continue sending a strong message that we want to maintain price stability at low levels, because inflation hurts the poor. So, I would imagine that we would want to stick to the current policy.”
Labour and communist allies of the ANC abhor inflation targeting and have demanded that it be scrapped.
They say strict adherence to the policy has led to the central bank raising interest rates to slow inflation and that this has hurt millions of poor people.
The bank’s repo rate has risen by five percentage points to 12% since June 2006. While inflation showed signs of abating in September, it has stayed well outside the central bank’s 3% to 6% target since April 2007.
The Congress of the South African Trade Unions and the South African Communist Party have become influential in the ANC since they helped to elect Jacob Zuma to the party’s leadership, defeating former president Thabo Mbeki.
Nene said the government’s prudent fiscal stance had helped to protect the economy from the global financial crisis and would enable it to weather the storm. He also dismissed speculation that he was being groomed to succeed Finance Minister Trevor Manuel after elections next year. — Reuters