CLAIRE BISSEKER: Lower the inflation target then let inflation expectations do the work
The biggest obstacle to lower inflation is overcoming government inefficiency, which keeps administered prices high
13 September 2021 - 13:33
It is hard to imagine that the great Argentinian footballer Diego Maradona could have anything in common with monetary policy, but he is a useful metaphor for the trick the SA Reserve Bank hopes to pull off in its bid to have SA’s inflation target lowered to 3%.
Emboldened by the Bank’s success in shifting actual inflation and inflation expectations from a sticky 6% to 4.5% over the past few years, without having to hike rates or sacrifice growth unduly, governor Lesetja Kganyago thinks it’s high time for SA to lower the 3%-6% target band to a 3%-point target...
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