The controversy around monetary policy and the inflation target - are we sacrificing sustainable growth and full employment?

The document critiques the South African Reserve Bank's (SARB) restrictive interest-rate cycle and its shift toward a lower inflation target, arguing that such policies prioritize price stability over sustainable growth and employment. It proposes a more 'developmental' approach to monetary policy, including a 'look-through' rule for supply shocks and targeted funding tools for productive sectors.

• Since 2022, the South African Reserve Bank (SARB) has implemented a restrictive interest-rate cycle, raising the repo rate by approximately 475 basis points. Specifically, between March 2022 and May 2023, the repo rate increased from 4.25% to 8.25%.
• In November 2025, South Africa's inflation target was changed from a 3-6% range to a point target of 3% with a 1 percentage point tolerance band (effectively 2-4%).
• Evidence indicates that recent inflation surges in South Africa were primarily driven by global supply shocks, such as energy, logistics, food, and fuel prices, rather than domestic demand.
• The document argues that the SARB has adopted a narrow interpretation of its constitutional mandate, prioritizing disinflation and credibility over the requirement to support balanced and sustainable growth.
• The briefing proposes a 'developmental' monetary policy framework featuring a 'look-through' rule for temporary supply shocks, explicit assessments of repo decisions on the real economy, and targeted funding tools similar to the Bank of England's Term Funding Scheme or the ECB's Targeted longer-term refinancing operations.

APA

Institute for Economic Justice (2026). The controversy around monetary policy and the inflation target - are we sacrificing sustainable growth and full employment? https://iej.org.za/wp-content/uploads/2026/05/IEJ-x-SMWX-Concept-note-Episode-11.pdf

Chicago

Institute for Economic Justice. The controversy around monetary policy and the inflation target - are we sacrificing sustainable growth and full employment? 2026. https://iej.org.za/wp-content/uploads/2026/05/IEJ-x-SMWX-Concept-note-Episode-11.pdf.

Wikipedia

{{cite report |author=Institute for Economic Justice |title=The controversy around monetary policy and the inflation target - are we sacrificing sustainable growth and full employment? |date=24 May 2026 |url=https://iej.org.za/wp-content/uploads/2026/05/IEJ-x-SMWX-Concept-note-Episode-11.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{instituteforeconomicjustice2026controversy, author = {{Institute for Economic Justice}}, title = {{The controversy around monetary policy and the inflation target - are we sacrificing sustainable growth and full employment?}}, institution = {Institute for Economic Justice}, year = {2026}, month = may, url = {https://iej.org.za/wp-content/uploads/2026/05/IEJ-x-SMWX-Concept-note-Episode-11.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }