Inflation targeting spot-on, says SARB

JOHANNESBURG – South Africa’s central bank has defended its inflation targeting framework, arguing it had helped reduce market uncertainty, boost investment and had not stifled economic growth.

Reserve Bank Deputy Governor Daniel Mminele said at a seminar in Cape Town the on Thursday that the SARB’s policy committee already took into account growth and employment when making its decisions, adding the trend in interest rates would have been the same without an explicit target.Inflation targets have come under fire from the ruling ANC and its trade union and communist party allies, leading to the Reserve Bank and government setting up a committee to assess their effectiveness and ‘adequacy’ in Africa’s biggest economy.The ruling alliance want the mandate of the bank broadened from a focus on inflation to also look at growth and jobs.Labour federation Cosatu, an increasingly influential voice since it helped Jacob Zuma to become president, has called for the target framework to be scrapped.He said critics of the mandate should not merely look at the impact of the target – currently to keep inflation at between three and six per cent – on output.Mminele said a recent study had shown that inflation targeting had not damaged growth.On the rand currency – which the ANC’s allies say is too strong at around 7,50 to the dollar – Mminele said the central bank supported a floating policy through which the market set its level.While a strong currency affected certain sectors of the economy, its importance in containing inflation should not be ignored, he said.- Nampa-Reuters