South Africa c.bank governor makes case for inflation ‘point target’

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JOHANNESBURG — South Africa’s central bank governor, Lesetja Kganyago, made the case on Wednesday for adopting an inflation “point target” of around 3% or 4% with a margin of error either side, as opposed to a 3% to 6% target range used currently.

“A more appropriate target would be a point target of around 3% or 4%, putting us in the same territory as our peers,” Kganyago said, without saying which countries he was referring to.

“Given the uncertainties around inflation, it would be useful to bracket the point target with an error range: probably plus or minus 1 percentage point,” he said in a virtual address on inflation-targeting at Stellenbosch University.

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“With the COVID-19 shock, we have seen what it’s like to have inflation rates nearer 3% and, with that, low interest rates.”

South Africa’s annual consumer inflation has since picked up to 4.6% in July, the latest month for which data are available, close to the midpoint of the bank’s target.

South Africa’s Reserve Bank cut its main lending rate by 300 basis points last year to a record low of 3.5% as inflation collapsed during the coronavirus crisis and as the economy needed support.

The bank has kept monetary policy accommodative, leaving the repo rate on hold for the past six meetings.

(Reporting by Alexander Winning Editing by Jane Merriman)