The South African Reserve Bank (SARB) Governor Lesetja Kganyago said that the organisation will push for a lower inflation target.
Kganyago made this announcement on Thursday at a lecture at Stellenbosch University.
In 2000, the Reserve Bank adopted an inflation target between 3% and 6%.
The SARB has been on a mission to lower this inflation, going from 3% to 5% and eventually 2% to 4%.
In September, Statistics SA announced that headline consumer inflation in South Africa fell to 4.4% year-on-year in August from 4.6% in July, with this being the third consecutive month of inflation falling.
Now Kganyago believes that SA has the opportunity to lower inflation further.
“We have an opportunity to achieve permanently lower inflation and therefore permanently lower interest rates,” Kganyago said.
“Executed effectively, a lower target could be achieved at little cost, just as we moved to 4.5% at little cost,” he noted.
When compared to other countries inflation in South Africa is still relatively high, according to the Governor and can be brought down.
“We have a relatively high inflation rate. We often speak as if this is a structural, inevitable thing and not a policy choice. But the fact is, we could have a lower inflation target, like almost all our peers, and with it, lower inflation,” Kganyago explained.
SA’s economy expanded by 1.1% in 2024
Earlier this week the SARB’s Monetary Policy Review noted that the South African economy is projected to expand by 1.1% this year.
The Reserve Bank said that the South African economy is also projected to expand by 1.8% in 2026.
The SARB has projected this growth based on the fact that the energy crisis has subsided and it forecasts that the electricity supply will improve.
South Africa’s economy will also expand due to a better-functioning logistics sector and lower inflation and interest rates, the SARB noted.
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