Monday, September 1, 2025 – The South African government and the South African Reserve Bank (SARB) have confirmed that ongoing work on reviewing the country’s inflation targeting framework will remain evidence-based and aligned with long-term economic stability.
Since 2017, the SARB has targeted inflation within a 3–6% range, aiming to anchor it at the midpoint of 4.5%. However, new research and consultations suggest that a wide target band, combined with persistently high inflation, could have long-term economic costs and entrench inequality.
Why Inflation Targeting Matters
Inflation targeting is central to macroeconomic stability. By maintaining low and predictable inflation, South Africa seeks to:
- Protect household purchasing power.
- Enhance investor confidence.
- Support sustainable economic growth.
The Ministry of Finance and SARB noted that, following the post-pandemic inflation surge, expectations have eased, with outcomes aligning more closely to the lower end of the 3–6% range.
At its July 2025 Monetary Policy Committee meeting, the SARB expressed a preference for consumer price inflation to remain closer to 3%, the bottom of the range.
Aligning With Trading Partners
National Treasury’s 2024 Macroeconomic Policy Review concluded that lower, stable inflation boosts growth and strengthens South Africa’s competitiveness with global trading partners.
Additional technical work by the Macroeconomic Standing Committee (MSC) is assessing whether the current band should be adjusted to narrow the range or lower the target altogether. Once finalised, recommendations will be presented to the Minister of Finance and the SARB Governor, who will jointly decide on any changes.
A formal announcement will then be made to anchor market and public expectations.
Global Risks and Local Resilience
Despite easing domestic inflation and a tempered debt trajectory, global risks—including rising public debt, geopolitical tensions, and potential financial shocks—highlight the need for a robust and flexible policy framework.
The joint statement emphasised that macroeconomic policy must balance stability with adaptability, ensuring South Africa remains resilient to external shocks while advancing long-term inclusive growth.
The review underscores a key policy debate: how South Africa can strengthen its economic framework while protecting citizens from the long-term costs of high inflation.
As the technical work concludes, South Africans can expect more clarity in the coming months on whether the inflation target will shift potentially ushering in a new chapter of monetary policy for the country.
