28 April 2022
Written by Jürgen Möller - School of Investment & Banking: Lecturer
Inflation Targeting and the inflation trajectory – A South African Perspective Jürgen Möller gives an outline of global developments and the implications on South African inflation.
Over the last decade, the South African consumer price index (CPI) remained mostly on the higher end of the Reserve Bank’s target range of 3% – 6%, with limited instances of breaches above 6%. CPI reached a low of 2.1% in May 2020, as a result of the economic contraction resulting from the severe lockdowns following the initial Covid-19 outbreak.
Globally, a strong economic recovery followed after restrictions were eased. Unfortunately, production did not recover at the same pace, and pent-up demand combined with a change in consumer spending away from services to goods led to supply-chain bottlenecks, fueling inflation.
Global inflationary pressures are likely to remain in place for some time, as the move towards clean energy and geopolitical tensions are keeping energy prices high. Furthermore, food prices have been increasing around the world. This has caused the Reserve Bank to increase its inflation projections in March 2022. It now expects headline consumer inflation for 2022 to come in at 4.9%, before moderating in 2023.