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An optimal inflation rate for South Africa

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  • Stephen G. Hall

    (University of Leicester)

Abstract

The objective of this paper is to consider whether the inflation target of the South African Reserve Bank, which is currently between 3 and 6%, should be lowered to something closer to that of South Africa’s trading partners, which is close to 3%. The paper reviews the theoretical literature and finds a strong contrast between much of the literature which argues for a zero inflation target and the practical implementation of inflation targeting around the world, where no country has adopted a zero target. Given this conflict it is clear that the theoretical literature is often too simplistic. The paper then considers the main arguments for a positive inflation target. The broad conclusion is that most of the arguments for a non-zero inflation target suggest a target in the range of 2–3%. However, any change in the target rate should be carried out slowly with full transparency and without loss of credibility.

Suggested Citation

  • Stephen G. Hall, 2025. "An optimal inflation rate for South Africa," Economic Change and Restructuring, Springer, vol. 58(3), pages 1-29, June.
    • Handle: RePEc:kap:ecopln:v:58:y:2025:i:3:d:10.1007_s10644-025-09882-3
    DOI: 10.1007/s10644-025-09882-3
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    References listed on IDEAS

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    Cited by:

    1. Christopher Loewald & Rudi Steinbach & Jeffrey Rakgalakane, 2025. "Less risk and more reward revising South Africas inflation target," Working Papers 11079, South African Reserve Bank.
    2. Anis Foresto & Monique Reid & Jeffrey Rakgalakane, 2025. "State dependence of the Phillips curve what does this mean for monetary policy," Working Papers 11080, South African Reserve Bank.

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