SARB remains committed to inflation targeting

The Monetary Policy Committee of the SA Reserve Bank remains committed to bringing inflation back to within the target range "over a reasonable time horizon," the central bank said today in its latest Monetary Policy Review.

The inflation target, set between 3% and 6%, was introduced in February 2000 in an attempt to lower inflation. "The money policy environment remains particularly challenging," the SARB said.

South Africa is not the only country that faces food and oil price shocks and indications show that food price increases are becoming more entrenched globally. They are being compounded by the restriction of food exports by a number of countries.

The biofuel industry was also fingered as one of the factors exacerbating the problem. “The situation is further aggravated by the diversion of food production to biofuels in response to high and rising international energy prices,” the SARB said.

The SARB's monetary policy would continue to focus on medium term outcomes because of the lagged response to monetary policy actions.

"The bank's current expectation is for inflation to peak in the near term and then to follow a downward trend to return to within the target range by the end of 2009,” it said. – Sapa