JOHANNESBURG – South Africa’s Reserve Bank is aware that inflation targeting must be pursued with economic growth in mind so there is no need for a discussion of the central bank’s mandate, a senior official from the ruling ANC party said on Monday.
A local paper reported on Sunday the ANC was mulling reforms to the constitution which would include changing the central bank’s powers and its price stability mandate, with some party members calling for the inflation targeting strategy to be scrapped.
The ANC’s powerful labour union allies have in the past accused the Reserve Bank of pursuing its target of keeping inflation within a 3-6 percent target, without considering the negative impact of relatively high interest rates on economic growth and subsequently unemployment.
On Monday Enoch Godongwana, a member of the ANC’s decision-making national executive committee and head of its economic transformation committee (ETC), said Finance Minister Pravin Gordhan had made clear the Bank must take into account key issues like unemployment.
“The reason why within the ETC we have not pursued that discussion (on inflation targeting) is precisely because the Minister of Finance … and the Reserve Bank have dealt with that matter to the satisfaction of everybody else,” Godongwana told a media briefing.
“We have felt that there’s no reason to pursue the discussion anymore, so it’s not contained in any of our documents at the moment.”
The ANC, which holds a policy-setting conference in June, is due to release draft policy discussion documents to its branches on Monday. Proposals in the discussion papers would have to be adopted at another conference in December to shape government policy.
The Reserve Bank slashed rates by 650 basis points in the two years to November 2010 to help the economy recover from a recession. Analysts see rates remaining at three-decade lows this year to help growth, despite inflation having pierced the upper end of its target band.
