Treasury Refutes Claims of Inflation Target Shift in Upcoming Budget Statement
Viable News Team 
Image Source: GovernmentZA
The National Treasury has firmly rejected speculation that Finance Minister Enoch Godongwana is preparing to announce a shift in South Africa’s inflation targeting policy during the upcoming Medium-Term Budget Policy Statement (MTBPS).
This clarification comes on the heels of a recent announcement by the South African Reserve Bank (SARB), whose Monetary Policy Committee (MPC) revealed a preference for inflation to settle at the bottom of the existing target range around 3%. The announcement led to widespread assumptions that an official move toward a lower inflation target would be confirmed in the next fiscal briefing.
However, in a statement issued on Sunday, the Treasury emphasized that no such policy change has been finalized, and that Minister Godongwana has no intention of making an announcement on inflation targeting during the MTBPS.
“It is well-established that policy making responsibility in this area resides with the Minister of Finance, working with the President and Cabinet, who sets the inflation target in consultation with the South African Reserve Bank,” the statement read.
While SARB has indicated its intent to use a 3% anchor for its forecasting models and monetary policy guidance, Treasury reiterated that formal adjustments to the inflation target must follow due constitutional and institutional processes, involving:
- Consultation between the National Treasury and SARB,
- Input from the Cabinet and Presidency, and
- Engagement with broader stakeholders.
Godongwana added that any shift in inflation targeting will not be made unilaterally, nor outside of this long-established process.
“Comprehensive consultation between National Treasury, the Reserve Bank, Cabinet, and relevant stakeholders is essential. Any changes to the target, if necessary, will follow this process,” the Finance Minister stated.
What is Inflation Targeting?
Inflation targeting is a monetary policy framework where a central bank sets a specific inflation rate as its goal, typically to anchor public expectations and ensure price stability. South Africa currently operates within a 3–6% target range, with the midpoint (4.5%) often serving as the informal guidepost. A shift toward a formal 3% objective would represent a tighter and more ambitious regime, with implications for interest rates, investment, and borrowing costs.
Why It Matters
South Africa’s inflation has recently remained at the lower end of the target range. SARB Governor Lesetja Kganyago noted that lower inflation expectations can open the door to more sustained interest rate cuts, stimulate economic growth, and support long-term fiscal stability.
However, Treasury’s statement reminds the public and markets that any structural change to such a cornerstone policy cannot be rushed, regardless of the Reserve Bank’s policy trajectory.
As the nation awaits the MTBPS, scheduled for later this year, economic observers will be watching closely for signs of how government plans to balance inflation management with economic growth amid global uncertainty and domestic fiscal challenges.
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