South Africa’s inflation target regime is drawing renewed attention as the National Treasury and South African Reserve Bank indicate a possible move toward a lower and narrower band. In a joint statement released yesterday, the two bodies said global debt and inflation pressures had highlighted the need for robust macroeconomic frameworks, with domestic inflation cooling and the nation’s debt path improving since the pandemic.

The statement reaffirmed the 3% to 6% target for consumer price inflation, but Reserve Bank research noted that sustained higher inflation has long-term costs for growth and inequality. Since 2017, the Reserve Bank has informally focused on the 4.5% midpoint, but as inflation expectations eased during the past year, the Monetary Policy Committee signalled in July 2025 that it now favours inflation settling closer to 3%, the lower end of the official band.

The Treasury’s 2024 Macroeconomic Policy Review mirrored these points, concluding that low, stable inflation fosters faster economic growth and preserves monetary policy credibility. While the current target system is seen as broadly effective, the Treasury suggested further improvements could enhance it. The government’s Macroeconomic Standing Committee is finalising technical work on the target, with recommendations to be presented to the Finance Minister and Reserve Bank Governor before any official change is made.

This cautious and consultative process reflects growing awareness that unchecked inflation can undermine economic progress and increase inequality. At the same time, it shows a willingness to adapt South Africa’s policy framework in response to global economic challenges, demonstrating the need for credibility and flexibility as pressures evolve.

South Africa’s next steps on the inflation target will be viewed through the lens of both credibility and adaptability. Policymakers’ approach aims to secure lasting economic gains while preparing for global uncertainty.

In addition, the statement will help calm markets, as there seemed to be some tension between the Reserve Bank and the National Treasury over what many people saw as a unilateral decision to by the Reserve Bank to lower the inflation target.