South Africa Finance Minister to address inflation targeting policy

South Africa’s Finance Minister Pravin Gordhan said on Monday he would address the central bank’s inflation targeting policy when he unveils the national budget later this month.

He did not say if the announcement would be the government’s proposal or changes to the policy already agreed with the central bank.

The ruling ANC party’s labour union and communist allies want the Reserve Bank’s mandate broadened, saying it is currently too focused on controlling inflation, leading to relatively high interest rates they say have worsened the plight of the poor.

The ANC agreed with its leftist allies last year to review the mandate of the central bank and possibly widen it to include job and economic growth indicators.

Nearly one million jobs were shed during South Africa’s recession last year, the first in nearly two decades, and Gordhan said on Monday employment creation was still “a major concern”.

The National Treasury said last week it had decided to asses the effectiveness of inflation targeting with the central bank.

“We are talking, working, thinking, reflecting, interacting with the key stakeholders from within the government and listening to the voices from outside and will inform South Africa where we intend to go on February 17,” Gordhan said in a radio interview on Monday, referring to the budget date.

He reiterated that the independence and mandate of the central bank remained enshrined in the constitution, despite reports that the ANC has called for the nationalisation of the institution.

“Nothing that has been said so far in any way impinges on the independence and mandate of the Reserve Bank,” Gordhan said.

“South Africans can relax … The central bank will play the role that it is supposed to play and respond to the developing environment the world over as it deems it necessary; in consultation with the ministry of finance.”

Source: Reuters