Targeting Inflation and Full Employment in South Africa

Abstract

The South African Reserve Bank (SARB) insists that keeping inflation within the 3–6 percent target range set by the government is its most important policy goal. When the expected future inflation rate rises above the target band, interest rates must be increased. Since the inflation rate breached its 6 percent target ceiling this year, SARB has raised the repo rate1 by 250 basis points, to 11 percent, and the commercial banks’ prime lending rate rose to 15 percent. The governor indicated in the 2007 annual report that he is prepared to raise the repo rate further at subsequent meetings to drive inflation within its 3–6 percent target range, irrespective of South Africa having probably the world’s highest unemployment rate.KeywordsInterest RateMonetary PolicyInflation RateSocial ContractFull EmploymentThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.