The Public Servants Association (PSA) said on Monday moving towards the lower end of the current inflation range instead of the midpoint could lead to greater price stability, which is synonymous with lower inflation, and it could reduce the volatility that complicates investment and economic planning.

The PSA welcomed South African Reserve Bank’s (SARB’s) willingness to reconsider its inflation target approach, which it had previously rigidly maintained, with the PSA calling for transparent engagements with economics experts to ensure that South Africa is placed on a positive economic trajectory.

“Lower inflation targets can also bolster the SARB’s credibility, thus making its monetary policy more predictable and transparent,” the association said.

The SARB currently aims to maintain consumer price inflation within a target range of 3% to 6%, with a midpoint objective of 4.5%.

PSA pointed out that the need to enhance South Africa’s economic competitiveness and align with global standards could not be overstated, noting the economic pressure the country was facing.  

It added that this could further foster a more conducive environment for sustainable economic growth by reducing uncertainty and encouraging investment, making the economy more resilient to external shocks.

The PSA has continuously called on the SARB to explore measures, including a policy shift, to support economic growth to alleviate financial pressures on consumers.

The association highlighted that South Africa’s economy faces structural challenges, such as high unemployment and inequality, which it said could “complicate the transition to a lower inflation target”.

“This should, however, not deter the SARB to boldly embark on such a move, which will put the country in a group of many advanced economies and emerging markets that have settled on maintaining inflation targets at around 2% and 3%, respectively,” it noted. 

The PSA explained that this shift reflected a global trend towards lower inflation targets to enhance economic stability and growth potential.

The PSA said it was aware that the SARB and National Treasury had been working on revisiting the inflation goal for almost a year, with discussions expected to continue.

The ongoing debate highlighted the importance of aligning monetary policy with evolving economic realities and global standards, it explained.

The PSA further called on government and the SARB to consider the implementation of policies to address the spiralling cost-of-living to support policy interventions to ensure sustainable economic recovery.