Economists Applaud Treasury’s New Inflation Target Shift To 2–4% Range

Economists have welcomed the National Treasury’s decision to endorse a new inflation target range, marking a major shift in South Africa’s monetary policy direction.

Finance Minister Enoch Godongwana officially confirmed the long-awaited revision to the inflation-targeting framework, first introduced in 2000, during his Medium-Term Budget Policy Statement (MTBPS) in Parliament on Wednesday.

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Under the revised framework, the inflation target band will narrow from 3%–6% to a tighter range of 2%–4%, with the midpoint now set at 3%.

The South African Reserve Bank (SARB) is expected to steer both inflation and inflation expectations towards this new goal over the next two years.

Economists See Long-Term Gains Despite Short-Term Trade-Offs

Experts believe the adjustment will bolster policy credibility and reinforce the central bank’s commitment to price stability. However, some caution that it could involve short-term economic challenges.

North West University Business School economist Raymond Parsons said the move “strengthens policy credibility and aligns with the goal of lower inflation expectations,” but warned that “it also entails short-term fiscal and growth trade-offs.”

Economists at Nedbank highlighted that a lower inflation target could lead to reduced interest rates, which in turn would “help reduce debt service costs, freeing up more fiscal resources for the social wage and infrastructure investment.”

Treasury’s projections support this outlook, forecasting a repo rate decline to 6.75% by the end of 2026 and 6.25% by the end of 2027.

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