Economists expect unbearable pressure on families to increase.
South Africa's inflation battle has entered a more dangerous phase, with the South African Reserve Bank (Serb) making it clear it will not retreat from its 3% target – even as a fresh global oil shock threatens to send prices soaring and put pressure on already stressed households.
“We learned lessons from the previous shock in 2002 where the target was lowered, and when the shock came, we decided to go back to the old target. It was a costly macroeconomic lesson,” said Serb governor Lestja Kganyago.
“This time, the inflation target is 3% and it remains at 3%. We have experienced this shock and we have to focus on realizing our 3% target. Doing so will make us more resilient and stand in good stead against tough global conditions.”
The pledge comes as Serbia's latest monetary policy review warned that “escalating conflict in the Middle East and rising oil prices have exerted upward pressure on global inflation” and increased the risk of a reversal to deflation.
The bank notes that inflation, which eased to its 3% target in February, is now expected to rise in the near term as oil…