{"id":90556,"date":"2025-09-28T18:37:51","date_gmt":"2025-09-28T18:37:51","guid":{"rendered":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time"},"modified":"2025-09-28T18:57:19","modified_gmt":"2025-09-28T18:57:19","slug":"south-african-reserve-bank-running-out-of-time","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time","title":{"rendered":"South African Reserve Bank Running Out of Time"},"content":{"rendered":"

Africa-Press – South-Africa. <\/strong><\/span>South Africa\u2019s window of opportunity to lower its inflation target and mitigate some of the volatility that would result from this change is closing.<\/p>\n

Stabilising South Africa\u2019s inflation at about 3% could reprice the entire structure of the country\u2019s interest rates lower and give the country much-needed economic momentum.<\/p>\n

This is according to Allan Gray investment analyst Sandy McGregor, who recently outlined the potential benefits of lowering South Africa\u2019s inflation target.<\/p>\n

The Reserve Bank and the National Treasury have been in talks to lower the country\u2019s inflation target for months, with no official change announced yet.<\/p>\n

Inflation targeting has been the Reserve Bank\u2019s preferred approach to monetary policy since 2000, with the current target range of 3% to 6% having been in place since the turn of the century.<\/p>\n

Reserve Bank Governor Lesetja Kganyago and many other financial experts have strongly supported lowering and narrowing the target, believing it could have immense benefits for South Africa.<\/p>\n

McGregor explained that the wide inflation target range South Africa settled on in 2000 addressed the political realities of the time, with the Reserve Bank focusing on the upper band of the range for the following 14 years.<\/p>\n

\u201cIn the first decade after inflation targeting commenced, inflation averaged 6.2% but was very volatile, reaching a peak of 13.7% in August 2008,\u201d McGregor said.<\/p>\n

\u201cIt was only during Gill Marcus\u2019s term as SARB governor between 2009 and 2014 that inflation settled down at about 6%.\u201d<\/p>\n

When Kganyago took over as governor in 2014, he interpreted the Reserve Bank\u2019s mandate as requiring a target of 4.5%, the midpoint of the range.<\/p>\n

This was achieved in 2019 when inflation averaged 4.2%. However, as many other central banks around the world, the Reserve Bank slashed interest rates to provide relief for struggling households during the Covid-19 pandemic.<\/p>\n

Then, in response to the post-pandemic inflation shock, which saw South Africa\u2019s inflation reach 7.6%, the repo rate was gradually increased, with the Reserve Bank implementing 475 basis points of hikes.<\/p>\n

In response to this, inflation again started to decline, and in November 2024 reached a low of 2.8%. It has remained close to 3% ever since, as shown in the graph below, courtesy of McGregor.<\/p>\n

Saving grace<\/b><\/p>\n

With South Africa\u2019s inflation now low and stable, the Reserve Bank recently announced that it would shift its preferred target from 4.5% to 3%.<\/p>\n

It should be noted that this is not an official target change, with discussions with the Treasury still ongoing, but merely a preferred target.<\/p>\n

McGregor said this decision was the Reserve Bank taking advantage of South Africa\u2019s low inflation to \u201cseize the opportunity\u201d for a lower target.<\/p>\n

He explained that inflation presents a significant threat to South Africans\u2019 finances and disproportionately burdens the poor.<\/p>\n

\u201cWhile theoretically current interest rates impact future inflation, usually it is inflation that leads interest rates,\u201d he said.<\/p>\n

\u201cThe widespread claim that monetary policy is data-dependent is an admission of this truth. As inflation falls, so does the appropriate real rate.\u201d<\/p>\n

He pointed out that, in South Africa, inflation at 4.5% requires a real rate of about 2.5%, giving a nominal rate of 7%.<\/p>\n

However, as inflation declines, the real rate required to promote price stability also declines. Therefore, with inflation at 3%, it will be about 2%, which implies the nominal rate should be 5%.<\/p>\n

\u201cThe SARB is correct in saying that we are presented with an opportunity we should not miss. The journey to 3% inflation could be volatile,\u201d he said.<\/p>\n

\u201cHowever, if inflation stabilises at about 3% the entire structure of interest rates can reprice lower.\u201d<\/p>\n

\u201cSouth Africa is trapped in economic stagnation. The positive economic benefits arising from lower rates would contribute to getting the economy going again.\u201d<\/p>\n

For More News And Analysis About South-Africa<\/span> Follow Africa-Press<\/span><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – South-Africa. South Africa\u2019s window of opportunity to lower its inflation target and mitigate some of the volatility that would result from this change is closing. Stabilising South Africa\u2019s inflation at about 3% could reprice the entire structure of the country\u2019s interest rates lower and give the country much-needed economic momentum. This is according […]<\/p>\n","protected":false},"author":84,"featured_media":90555,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,5,12],"tags":[275],"class_list":["post-90556","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","category-policy","tag-south-africa-2"],"yoast_head":"\nSouth African Reserve Bank Running Out of Time - South Africa<\/title>\n<meta name=\"description\" content=\"South Africa\u2019s window of opportunity to lower its inflation target and mitigate some of the volatility that would result ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South African Reserve Bank Running Out of Time\" \/>\n<meta property=\"og:description\" content=\"South Africa\u2019s window of opportunity to lower its inflation target and mitigate some of the volatility that would result ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time\" \/>\n<meta property=\"og:site_name\" content=\"South Africa\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2025-09-28T18:37:51+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2025-09-28T18:57:19+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/09\/sm_1759073115.985033.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"675\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"South African Reserve Bank Running Out of Time\",\"datePublished\":\"2025-09-28T18:37:51+00:00\",\"dateModified\":\"2025-09-28T18:57:19+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time\"},\"wordCount\":617,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/south-africa\/sites\/31\/2025\/09\/sm_1759073115.985033.jpg\",\"keywords\":[\"South-Africa\"],\"articleSection\":[\"all news\",\"economy\",\"policy\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time\",\"url\":\"https:\/\/www.africa-press.net\/south-africa\/all-news\/south-african-reserve-bank-running-out-of-time\",\"name\":\"South African Reserve Bank Running Out of Time - 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