Africa-Press – South-Africa. Deputy minister of finance David Masondo says the National Treasury and South African Reserve Bank (Sarb) continue to work together to determine the future of the country’s official inflation target, warning it has implications for price stability and social order and shouldn’t be tinkered with.
Masondo was speaking at the 2025 RMB Morgan Stanley Investor Conference in Cape Town on Monday. His remarks come in a week when the Sarb’s monetary policy committee (MPC) is set to meet to decide the repo rate, which will be announced on Thursday.
The deputy minister said South Africa has long pursued an inflation-targeting framework, which is currently set at a broad target band of 3% to 6% inflation. He alluded to the collaborative analysis into inflation targeting under the auspices of the Government Technical Advisory Centre.
“Technical work by Treasury and the Reserve Bank suggests that this range is too wide and should be narrowed over time. For now, the existing 3—6% target remains operational, as reaffirmed in our joint statement on September 1,” he said.
Sarb governor Lesetja Kganyago has said South Africa would benefit from a lower and narrower official inflation target of 3%, which would be good for fighting the effects of inflation and for price stability. Announcing the repo rate in August, he declared that the MPC would now use forecasts with a 3% inflation anchor to inform future rate decisions.
This prompted the finance minister to issue a strongly-worded statement saying he had no plans to make such an announcement. He insisted that the official policy on inflation targeting would be set by him, the cabinet and the president, not by the MPC on its own.
Masondo outlined the serious effects of inflation targeting and monetary policy decisions on the cost of living, saying any decision on the future of South Africa’s inflation targeting approach should not be taken lightly.
“The principle remains clear. Low and stable inflation supports competitiveness, boosts demand, reduces borrowing costs and strengthens employment creation. Politically, it also helps to prevent the kind of social unrest that high inflation and high unemployment can trigger.”
He said finance minister Enoch Godongwana will on November 12 table the Medium-Term Budget Policy Statement (MTBPS), which will provide the most up-to-date numbers on the country’s fiscal trajectory and debt position.
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