SARB Governor says inflation mandate ''dated''

The South African Reserve Bank hosted its 2025 Biennial Research Conference where Governor Lesetja Kganyago shared his thoughts on the central bank's current inflation targeting framework. Since its adoption in 2000, the framework has led to lower inflation rates, resulting in much lower interest rates for the economy. The repurchase rate, which stood above 20% in 1998, has now dropped to 7.5%, significantly improving economic stability. Inflation targeting has also played a crucial role in reducing macroeconomic volatility, helping the economy withstand severe economic shocks such as the 2008 financial crisis and the 2020 COVID-19 pandemic. The framework has become a global monetary standard, lauded by central banks worldwide. However, Governor Kganyago points out that the current inflation target may be outdated, hindering South Africa's competitiveness and growth prospects. Advanced economies typically aim for a 2% inflation target, while emerging markets lean towards 3%. Some countries, like Armenia, have recently adjusted their targets to 3%, reflecting changing economic realities. South Africa's inflation target now appears ripe for reassessment to spur faster and sustainable growth. The conference will delve into exploring a more optimal inflation target for the country, especially in consideration of structural rigidities. Thought leaders and experts will engage in discussions to address the evolving challenges facing inflation targeting central banks. These dialogues will be pivotal in shaping the future trajectory of global macroeconomic policies and influencing South Africa's inflation targeting strategy going forward.