‘SA inflation target policy has not failed’

Tito Mboweni says the interest rate could increase further

Despite the soaring cost of living, the South African Reserve Bank says the inflation target policy has not failed. According to the latest Monetary Policy Review the successes or the failures of the inflation targeting depends on whether the bank finally achieves its mandate by bringing the economy to a low and stable inflation environment over time.

The Reserve Bank expects inflation to peak in the near future before returning within the target range by the end of next year. The bank's governor , Tito Mboweni, says interest rates could increase further, hitting mainly the middle and higher income earners.

The central bank says in its monetary policy review the regional economic outlook remained positive, but that tensions over Zimbabwe's disputed presidential election posed a downside risk.

Africa’s economic outlook remains positive
The central bank says Africa’s economic outlook remains positive given the continued favourable commodity price outlook, regional macroeconomic stability, rising oil production and continued capital inflows. However, the most important downside risks for growth in the region is heightened risk aversion by investors as a result of the tensions flowing from the Zimbabwe elections.

Meanwhile, Oil has surged to a record peak near $127 a barrel after Opec producer Iran said it was studying a plan to cut output despite signs record-high prices are hurting consumer nations.