Inflation targeting south africa pdf

With the global financial crisis becoming a global economic crisis, the south african economy is facing challenges both from external and domestic quarters in terms of lower aggregate demand. South africa formally introduced inflation targeting in february 2000, after announcing the intention to adopt the framework in august 1999. Interest rates were gradually hiked, especially after the. Between 1960 and 1998, these included exchangerate targeting, discretionary monetary policy, monetary. Inflation targeting is a central banking policy that revolves around meeting preset, publicly displayed targets for the annual rate of inflation. Monitory policy in south africa is conducted by the south african. The initial target measure was the cpix, which was defined as the consumer price index for metropolitan and other urban areas, excluding the interest cost on mortgage bonds. Inflation targeting is the right policy for south africa, the international monetary fund imf said on wednesday. Inflation targeting framework south african reserve bank. In the following sections we will try to argue that. Merits of inflation targeting in south africa 16 2.

In apartheid south africa this came in 1986 when the january inflation rate of 20. On wednesday last week, statistics south africa statssa released the june consumer price index numbers. In south africa, formal inflation targeting was adopted by south african reserve bank sarb in the february of 2000, with an objective of maintaining cpix1 inflation between the target band of 3 percent to 6 percent by 2002, using discretionary changes in repurchase repo rate as its main policy instrument. Inflation targeting, south africa and the great recession. Inflation targeting monetary policy, inflation volatility. Inflation targeting, inflation volatility, garch, inflation expectations.

Inflation targeting is increasingly seen as the best practice for central bank policy in many economies around the world, including a growing number of developing countries. There is no obvious theoretical consensus that inflation targeting could affect output growth. The south african reserve bank sarb moved to an official inflation targeting. Since its adoption of inflation targeting in 2000, the south african reserve bank has been. To date, inflation targeting has not made inroads into african economies, with only ghana and south africa having formally adopted this policy regime.

Prior to adopting the inflation targeting framework, the bank had adopted a number of frameworks. Inflation targeting and its impact on monitory policy. Since the introduction of the inflation targeting monetary policy, the country largely succeeded in containing. Inflation targeting is right for sa imf south african. Pdf inflation targeting monetary policy and unemployment. South africa, monetary policy, inflation targeting. Vermeulen september 11, 2015 abstract it is often publicly contended that overly strict application of ination targeting sties employment growth in south africa, with the phillips curve often cited as seemingly authoritative reference. Imf md dominique strausskahn said, however, that the policy had to be used flexibly. Pdf in this study we focus on the south african experience with inflation targeting. Advantages and disadvantages of inflation targeting 12 2. Inflation targeting monetary policy, inflation volatility and economic.