Assessing inflation targeting and its communication

Alberto Coco and Nicola Viegi, November, 2019
It is less onerous to achieve policy objectives when they are clear, credibly implemented and appropriately communicated, all of which reduces uncertainty

The study assesses:

  • The SARB’s monetary policy stance since 2000, when it adopted flexible inflation targeting. The Bank aims to maintain consumer price index inflation between 3% and 6% yearly. 
  • Whether changes in the policy stance are reflected in changes to the SARB’s communication.
  • The credibility of the SARB’s monetary policy.

What is the research context? 
Countries that adopt an inflation targeting framework tend to experience lower inflation. However, these frameworks may result in excessive exchange rate volatility and sluggish economic performance. Previous studies suggest that South Africa’s inflation targeting framework has been relatively successful at anchoring inflation expectations close to the target and containing the volatility of inflation. 

 

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Referenced publication: 
The monetary policy of the South African Reserve Bank: stance, communication and credibility