Sarb sticks with inflation band

what intertwined, and seemingly diverse views within the ANC on how the bank should operate have left investors with more questions than answers.

While the ANC’s national elective conference decided in 2017 that Sarb should be nationalised, its 2019 election manifesto didn’t expressly revisit the issue. Instead it indicated that Sarb must “pursue a flexible monetary policy regime”.

“Without sacrificing price stability, monetary policy must take into account other objectives such as employment creation and economic growth,” it said.

President Cyril Ramaphosa has been quick to allay fears that the ANC is seeking a change in the bank’s mandate or hoping to tamper with its independence.

Mminele said it had “at times” been suggested that Sarb should place greater emphasis on growth and employment objectives and that its mandate should be changed to make these objectives clearer.

“These suggestions may miss the key channels through which monetary policy best serves the goal of long-term economic development.”

He said South Africa’s monetary policy framework is not one of rigid inflation targeting, but a flexible one which takes account of the outlook for real economic growth and how it is likely to affect inflation.

“Trying to kick-start economic growth and employment through a larger dose of monetary policy stimulus would probably only have a short-lived impact on activity. By contrast, its implications for the current account, for policy uncertainty and inflation expectations would most likely be negative.”