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Macroeconomic Effects of a Potential Change in South Africa’s Inflation Target: South Africa
Author:
Jana Bricco
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https://orcid.org/0000-0001-6826-2160
,
Mario Mansilla
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, and
Philippe Wingender
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Series:
Selected Issues Papers
Volume/Issue:
Volume 2025: Issue 025
Language:
English
Publication Date:
31 Mar 2025
DOI:
https://doi.org/10.5089/9798229006385.018
ISBN:
9798229006385
ISSN:
2958-7875
Pages:
20
Keywords:
South Africa; Monetary Policy; Inflation Targeting; Sacrifice Ratio; Inflation Expectations; Central Bank Credibility; inflation expectation; South Africa's inflation-targeting framework; effects of a Potential; IT framework; Inflation; Fiscal consolidation; Monetary policy frameworks; Africa; Global
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IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries. It is based on the information available at the time it was completed.
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South Africa’s inflation-targeting framework has served the country well, playing a key role in reducing inflation since 2000. However, with inflation still above that of key trading partners, questions have arisen whether a potential shift from the current target band (3 to 6 percent) to a lower point target could better support macroeconomic stability over the medium term. This chapter explores the macroeconomic implications of such a shift. While medium run gains result from lower borrowing costs, the modeling analysis points to the critical role of inflation expectations and central bank credibility in minimizing near-term output costs; fiscal-monetary interactions are also important. A review of select case studies highlights the importance of close coordination among policymakers, clear communication, and gradual transitions to support the achievement of lower inflation.
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Cover Selected Issues Papers
Selected Issues Papers
Publisher:
International Monetary Fund